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EU Signals Hardening Stance on US Tariffs, Trade War Looming

Brussels is increasingly ready to retaliate against American trade measures, potentially escalating a dispute that has already disrupted global markets.

A senior European Union diplomat has indicated a significant shift in the bloc’s disposition towards the ongoing trade friction with the United States. The official stated that if US tariffs on EU goods are raised from their current 20 percent to 25 percent, they would reach levels seen before trade discussions commenced in April, a move that could compel Brussels to implement retaliatory measures. This comes as the US has already imposed substantial tariffs of 50 percent on EU steel and aluminum.

“We don’t want a trade war, but we don’t know if the US will leave us a choice,” the diplomat commented, underscoring the growing apprehension within the EU leadership.

Adding to this sentiment, a second EU diplomat confirmed a palpable change in the mood, stating, “the mood has clearly changed” in favor of a strong response.They unequivocally added, “We are not going to settle at 15 percent,” suggesting that previous lower-tier proposals are now off the table.

The initial shockwaves of this trade dispute were felt globally in early April when President Trump implemented broad “reciprocal” tariffs affecting nearly all US trading partners, before temporarily reducing them to 10 percent for a 90-day period. Despite these actions, US stock markets have experienced a notable surge, reaching record highs since April. Market participants appear to have largely disregarded President Trump’s recent threats to increase tariffs on major economies such as Japan, South Korea, and Brazil.

While economists have cautioned that President Trump’s trade policies could contribute to US inflation, the president has found some solace in only a marginal increase in the US monthly consumer price index this month.

In the interim, the United States has managed to collect nearly $50 billion (€43 billion) in additional customs revenue during the second quarter. Crucially, this period has seen a notable absence of widespread retaliatory measures from its largest trading partners.

The EU, however, has been systematically preparing and delaying the implementation of several packages of counter-tariffs, strategically aligning their activation with President Trump’s August 1st deadline for renewed trade talks.

These planned measures include imposing duties on approximately €21 billion of annual US imports, with targeted goods such as chicken and jeans set to face these tariffs effective August 6th. Furthermore, the European commission, wich spearheads the EU’s trade policy, has put forth proposals for retaliation on an additional €72 billion of annual US imports. These potential countermeasures could include levies on major American exports like Boeing aircraft and bourbon,should negotiations falter.

Sources familiar with the latest proposals indicate that the EU is actively preparing a third list of retaliatory measures, which would extend to the services sector. This proposed package is rumored to include levies on digital services and revenue generated from online advertising.

The sheer scale of the US tariffs is significant, impacting €380 billion of annual EU exports, out of a total of €532.3 billion.The United States remains the EU’s largest single market, representing a substantial one-fifth of the bloc’s export portfolio.

The European Commission has declined to provide a comment on these ongoing developments.

Copyright The Financial Times Limited 2025

What potential impacts could the proposed tariffs have on the US automotive industry, considering the manufacturing presence of European automakers within the country?

Trump Proposes Sweeping Tariffs on European Goods

The New Wave of Protectionism: A Detailed Breakdown

Former President Donald Trump has reignited trade tensions with Europe, proposing a series of critically important tariffs on a wide range of European goods. This move, announced earlier today, signals a potential shift towards increased protectionism and could have far-reaching consequences for global trade, economic growth, and international relations. The proposed tariffs, reportedly ranging from 10% to 60%, target key European exports including automobiles, agricultural products, luxury goods, and pharmaceuticals. This isn’t the first time Trump has threatened such measures; his previous administration implemented tariffs on steel and aluminum from Europe, sparking retaliatory actions.

Targeted Sectors and Potential Impact

The scope of these proposed tariffs is extensive. Here’s a sector-by-sector look at what’s on the table and the potential fallout:

Automobiles: A 25% tariff on European-made vehicles could significantly increase prices for American consumers and disrupt the automotive supply chain. European automakers like BMW, Mercedes-Benz, and Volkswagen have considerable manufacturing operations in the US, and these could be directly affected.

Agricultural Products: Tariffs on European agricultural goods – including wine, cheese, and olive oil – aim to protect American farmers. Though,this could lead to higher food prices for US consumers and possibly trigger retaliatory tariffs on US agricultural exports.

Luxury Goods: High tariffs on luxury items like handbags, watches, and apparel are intended to curb spending on European brands and boost domestic production. This sector is notably sensitive to price increases, potentially impacting sales volume.

Pharmaceuticals: This is where the situation gets particularly complex. Trump has repeatedly criticized European pharmaceutical pricing practices, alleging they unfairly contribute to higher drug costs in the United States. He specifically referenced the German healthcare system, calling it “socialist” and claiming it allows for price controls that disadvantage American companies (as reported by aerzteblatt.de). A tariff on European pharmaceuticals could exacerbate existing drug price concerns.

Historical Context: Trump’s Trade Wars

This latest proposal builds on a pattern established during Trump’s first term.His administration initiated trade disputes with numerous countries, including China, Canada, and Mexico, employing tariffs as a primary negotiating tactic.

2018 Steel and Aluminum Tariffs: These tariffs, imposed under Section 232 of the trade Expansion Act of 1962, where justified on national security grounds. They led to retaliatory tariffs from affected countries, impacting US exports.

US-China Trade War (2018-2020): This involved escalating tariffs on hundreds of billions of dollars worth of goods traded between the US and China. While a “Phase One” trade deal was eventually reached, many tariffs remain in place.

NAFTA Renegotiation: Trump successfully renegotiated the North American Free Trade Agreement (NAFTA), replacing it with the United States-mexico-Canada Agreement (USMCA).

EU Countermeasures: The EU has a well-established mechanism for imposing counter-tariffs in response to unfair trade practices.

WTO Dispute Resolution: The EU could also file a complaint with the World Trade Association (WTO), arguing that the US tariffs violate international trade rules.

Political Fallout: The tariffs could strain transatlantic relations, potentially impacting cooperation on other critical issues such as security and climate change.

Impact on US Consumers and Businesses

The proposed tariffs are likely to have a mixed impact on the US economy.

Higher Prices: Tariffs are ultimately paid by consumers in the form of higher prices for imported goods.

Supply Chain Disruptions: Tariffs can disrupt global supply chains, leading to delays and shortages.

Reduced Competition: Tariffs can reduce competition, potentially benefiting domestic producers but harming consumers.

Potential Job Losses: While tariffs are frequently enough touted as a way to protect American jobs, they can also lead to job losses in industries that rely on imported inputs or export to Europe.

Navigating the Uncertainty: Practical Tips for Businesses

Businesses with exposure to European markets should proactively prepare for potential disruptions.

1. Diversify Supply Chains: Reduce reliance on single suppliers and explore alternative sourcing options.
2. Assess Tariff Exposure: Identify which products are likely to be affected by the tariffs and quantify the potential cost impact.
3. Negotiate with Suppliers: explore opportunities to renegotiate contracts with European suppliers to mitigate the impact of tariffs.
4. Monitor developments: stay informed about the latest developments in the trade dispute and adjust strategies accordingly.
5. Seek Expert Advice: Consult with trade lawyers and consultants to understand the