Brussels, Belgium – After U.S. President Donald Trump announced new tariffs on imports of steel and aluminum, the European Union (EU) is preparing to respond decisively to protect its interests in the ongoing trade dispute. These tariffs could severely affect both the U.S. and the EU, which holds the world’s largest trading relationship, valued at €1.5 trillion in goods and services in 2023.
Trump’s move to impose a 25% tariff on steel and aluminum imports is part of his ongoing efforts to reduce the U.S. trade deficit, which has sparked concerns in Europe. Ursula von der Leyen, President of the European Commission, warned last week that the EU would “respond firmly” if targeted unfairly or arbitrarily, reports VOA.
The EU could adopt a strategy of “rebalancing” measures, similar to its actions in 2018 when it imposed €2.8 billion worth of tariffs on U.S. products in retaliation for Trump’s tariffs. These measures included targeting products such as bourbon from Kentucky, Harley Davidson motorcycles from Wisconsin, and orange juice from Florida. Although additional tariffs were initially planned, they were suspended when President Joe Biden took office and both sides agreed to halt further actions.
The EU’s response could involve imposing tariffs on U.S. goods again, as U.S. imports to the EU amounted to €347 billion in 2023, compared to the €503 billion of EU exports to the U.S. However, the EU has more tools at its disposal to retaliate, including the newly introduced Anti-Coercion Instrument (ACI), which came into effect in late 2023. This allows the EU to take action against third countries that exert economic pressure on its member states to change policies, offering a broader range of responses than tariffs alone.
Beyond tariffs, the EU could restrict access to public procurement markets for U.S. companies or take actions that influence trade or investment in services. Given the U.S. trade surplus in services, such as digital services provided by companies like Amazon, Microsoft, Netflix, and Uber, the EU could target these sectors. Restrictions could also apply to intellectual property protection, financial services, and agricultural products.
The ACI allows the European Commission up to four months to assess potential tariff cases and propose action plans to EU members, who then have around two months to approve them. Diplomatic solutions will also be pursued, with the Commission able to suspend any measure for up to six months while seeking negotiations.
In addition to trade policy, the EU could address the dominance of major U.S. tech companies like Apple, Google, and Meta under its Digital Markets Act (DMA) and Digital Services Act (DSA). These regulations aim to curb antitrust practices and content moderation. The EU could impose fines, potentially as high as 10% of global turnover for DMA violations.
Tech giants like Meta’s Mark Zuckerberg and Tesla’s Elon Musk have voiced opposition to EU regulations, with Musk frequently clashing with European regulators.
The EU also has the option to implement digital services taxes, an initiative that France and other EU countries have already pursued. While discussions at the OECD on a global solution continue, the EU may revisit digital taxes as a retaliatory measure.
As the situation unfolds, the EU will continue to assess its response, balancing trade protection with diplomatic efforts to avoid further escalation.
