EU Races to Mitigate US Tariff Threats

Brussels, Feb 20 (NationPress) The EU's trade commissioner is currently visiting Washington to engage in discussions with his US counterpart, aiming to prevent a potential tariff conflict with the United States.

The recent tariff proposals from the US, if left unaddressed, threaten to adversely affect the already struggling EU economy. Maros Sefcovic, the European Commission's Commissioner for Trade and Economic Security, is leading this initiative as part of the bloc's strategy to alleviate rising trade tensions, primarily arising from the EU's trade imbalance with the US.

On February 10, the US administration declared its intention to enforce a 25% tariff on imports of steel and aluminum while also suggesting reciprocal trade strategies, which quickly drew criticism from the EU.

The European Commission stated, 'We perceive President (Donald) Trump’s suggested reciprocal trade policy as a misguided approach.'

The US's actions have raised alarms in the EU, as they are predicted to increase the strain on exports, the manufacturing sector, and the overall economy of the bloc.

The European Steel Association warned that the EU might forfeit up to 3.7 million tonnes of steel exports to the US, which is the second-largest market for EU steel producers.

Numerous steel facilities in the EU, already facing challenges due to escalating costs and declining demand, may be forced to shut down, according to the association, as reported by Xinhua news agency.

Bert Colijn, an economist at ING, believes additional tariffs could result in a prolonged downturn for the European industrial sector.

The suggested reciprocal tariff strategy will also significantly impact the struggling EU automotive sector, particularly in Germany. Industry experts have expressed concerns that the tariff situation is more intricate than it appears.

Hildegard Mueller, President of the German Association of the Automotive Industry, pointed out that while the US criticizes the EU's 10% tariff on imported passenger cars, it imposes a 25% tariff on imported pick-up trucks, which are among its leading sales.

Once regarded as the 'engine of the European economy,' Germany's production has contracted for two consecutive years, ranking it among the poorest performers in the EU. In January, the German government adjusted its growth forecast for 2025 from 1.1% to 0.3%. The new US tariffs will exacerbate the troubles of the German economy, with exports of steel and automotive products to the US expected to drop.

The US tariffs will also negatively impact France, where the economy witnessed a contraction in the last quarter of 2024. French businesses in the automotive, pharmaceutical, and wine sectors are anxious that US tariff actions could diminish their exports to the US market. The French government is currently facing challenges with high public debt and fiscal deficits.

The US trade strategy has also captured the attention of the European Central Bank (ECB), which is currently easing its restrictive monetary policies by lowering interest rates. In the event of a trade conflict, rising prices could hinder or even derail the ECB's rate-cutting agenda. ECB President Christine Lagarde previously cautioned that the US government's planned tariffs 'would have a global negative impact.'

EU trade ministers from all 27 member states reached a consensus during a video conference last week following the US's announcement of new tariffs.

The EU trade ministers are convinced that negotiations will be the most effective approach to avert a tariff conflict.

The EU is committed to maintaining a constructive dialogue and is prepared to negotiate to find viable solutions, Sefcovic stated. At the Munich Security Conference, he expressed the EU's readiness to discuss trade imbalances, automobiles, soybeans, liquefied natural gas (LNG), and other negotiable topics.

In an effort to address US concerns about the trade deficit with the EU, European Commission President Ursula von der Leyen previously suggested increasing LNG imports from the US as a practical trade strategy. The EU is also contemplating importing more agricultural products and military supplies from the US and reducing its tariff on US vehicles from the current 10% to 2.5%.

Having identified tariffs as a defining feature of the Trump administration, the EU has proactively taken steps to mitigate the imminent threat of new US tariffs. Despite opposition from certain member states, the EU has secured a free trade agreement with the South American trade bloc MERCOSUR to shield against the unpredictability of US trade policies and diversify trade relations. Additionally, the EU and Canada have agreed to fortify trade and investment ties this month.

Simultaneously, countermeasures are being prepared, as Von der Leyen pledged that the EU would act to protect its economic interests and respond to US tariffs, asserting that 'the unjustified tariffs will elicit firm and proportional counteractions' from the EU.

According to insiders from the European Commission and the European Parliament, the EU has already drafted a list of retaliatory actions.

Bernd Lange, Chair of the European Parliament's International Trade Committee, cautioned that the EU could swiftly retaliate against the US's double tariff rates. Products such as motorcycles, jeans, peanut butter, whiskey, and other items that affect US exporters might be targeted, particularly focusing on products from US states with strong Republican backing and historically robust US exports.

Some European Commission officials disclosed that the EU will explore the feasibility of implementing stricter import limitations, including restricting imports of agricultural goods like soybeans cultivated using EU-banned pesticides, in retaliation against the US's 'reciprocal tariffs.'

The EU's 'Anti-Coercion Instrument,' which became effective at the end of 2023, is also a part of the EU's toolkit. Under this legislation, the EU can employ retaliatory measures against nations that attempt to economically pressure EU member states into altering their policies. A broader spectrum of counteractions is now available, enabling the EU to not only impose tariffs on goods but also restrict third-country companies from participation in public procurement projects or limit trade and investment services.

While the US experiences a trade deficit with the EU regarding goods, it maintains a surplus in the services sector. The EU has been a vital market for numerous US technology giants, including Amazon and Microsoft. The EU could potentially weaken intellectual property safeguards for US firms within the EU market and employ regulatory measures to limit the operations of American tech companies within Europe.

In line with the Digital Markets Act and the Digital Services Act, the EU has initiated investigations into Apple, Alphabet, X (formerly Twitter), and Meta. Furthermore, the EU may revive the 'digital services tax,' imposing fees on digital services such as online advertising and data sales provided by American tech firms.