EU prepares 'strong plan' to tackle Trump's global tariff threats

By Jorge Valero and Alberto Nardelli

 

The European Union said it will use a broad range of options to retaliate against the US if President Donald Trump follows through on his threat to impose so-called reciprocal tariffs on the bloc this week. 

“We do not necessarily want to retaliate,” European Commission President Ursula von der Leyen said on Tuesday. “If necessary we have a strong plan to retaliate and will use it.”

 

The US intends to impose sweeping tariffs on global partners as soon as Wednesday. Trump has said the measures will rectify tariffs as well as non-tariff barriers that he says are unfair, such as domestic regulations and how countries collect taxes, including the EU’s value-added tax. The EU says its VAT is a fair, non-discriminatory tax that applies equally to domestic and imported goods.  

France and other countries have called on trade officials to consider deploying the bloc’s anti-coercion instrument — a tool designed to strike back against nations that use trade and economic measures coercively. Such a move could lead to restrictions on trade and services as well as certain intellectual property rights, foreign direct investment and access to public procurement, Bloomberg previously reported.

 

 

Von der Leyen said that the goal is a “negotiated solution” once the new tariffs are announced. They are expected to enter into force in parallel with additional 25% tariffs on all the cars imported to the US and 25% duties on steel and aluminum imports from global partners. The EU is preparing countermeasures on up to €26 billion of US goods over the metals duties.

 

Von der Leyen mentioned that Europe’s strength lies not only in trade but also in technology, hitting at the relevance of the European business for large US tech firms that the EU could target as part of the retaliatory measures. The commission could use various legal instruments to restrict access to government contracts or digital advertising sales in a market worth around €100 billion ($108 billion).

 

“Europe holds a lot of cards,” von der Leyen said. “From trade to technology to the size of our market. But this strength is also built on our readiness to take firm countermeasures. All instruments are on the table.” 

Bloomberg reported earlier that the commission, the EU’s executive arm that handles trade matters for the bloc, is working on a “term sheet” for a potential agreement with the US after the new tariffs take effect. The term sheet would set out areas for negotiations on tariffs, mutual investments with the US as well as easing certain regulations and standards.

 

But coming to a common position with the 27 member states on areas for discussion with the US and potential concessions will take time, according to a person familiar with the talks. EU trade ministers will meet on April 7 in Luxembourg to begin discussing how to react to Trump’s tariff package and to prepare for the difficult talks.

 

In addition to the reciprocal tariffs and levies on cars and some parts, Trump has also announced other sectoral duties on products including lumber, pharmaceutical goods and semiconductors. It’s unclear when those additional duties will be imposed.

 

Trump’s administration has highlighted EU regulations seen as an obstacle for US exporters, such as digital taxes, environmental requirements or the VAT when senior EU officials met with their counterparts in Washington in recent weeks to try and avoid a total confrontation. 

The EU had offered the US administration a deal to lower tariffs on industrial goods including cars, along with the possibility of increasing imports of American goods such soybeans and liquefied natural gas. But the EU’s trade chief, Maros Sefcovic, who traveled to Washington last week, has thus far failed to convince the US to start negotiations ahead of the Wednesday announcement. 

 

Trump has said that his tariff wall would incentivize foreign producers — or US companies operating abroad — to build facilities in the US and hire American workers, reversing a hollowing-out of the country’s middle class. In addition the tax barrage also intends to generate revenue to help pay for tax cuts.

 

But EU officials and companies are concerned about the consequences of such a trade shock for the relationship between the two longstanding allies, when both partners face Russia’s threat on Europe’s Eastern flank and China is resisting to comply with open market rules.

 

“This is the largest and most prosperous trade relation worldwide,” von der Leyen said on Tuesday. “We would all be better off if we could find a constructive solution.”

 

As part of its response to the US trade offensive, the EU also wants to progress on diversifying its trade relations. Adding to the agreements in place with 76 countries, the EU recently concluded talks with the Mercosur bloc, Mexico and Switzerland and aims to finalize a deal with India by the end of the year. 

 

“Our message is clear: Europe is reliable, predictable and open for fair business,” von der Leyen said.