Here’s how Europe will respond (perhaps) to Trump’s tariffs

What is the European Commission studying to respond to Trump's tariffs on steel and aluminium. Extract from the European Mattinale

Tariffs on aluminum and steel are not a surprise for the EU. They had already been imposed by Trump during his first term in 2018. Jean-Claude Juncker's Commission had responded with countervailing duties on various American products – from Harley Davidson motorcycles to bourbon – worth 2.8 billion euros. Other compensatory measures on goods worth 3.5 billion euros were supposed to come into force on June 1, 2021. But an agreement between Ursula von der Leyen's Commission and Joe Biden's Administration led to the suspension of all duties until March 31, 2025. No one in Brussels expected the Trump Administration to extend the trade truce with the EU signed by its predecessor. The Commission can therefore quickly reactivate all the countermeasures foreseen by the 2018 dispute, affecting American goods worth over 6 billion euros.

BRUSSELS' COUNTERMEASURES TO TRUMP'S DUTIES

If Trump's trade war extends beyond aluminum and steel, the Commission has already prepared countermeasures in other sectors. Ursula von der Leyen ordered her services to start working on trade retaliation even before Trump's election in November.

The choice facing the Commission, in consultation with the Member States, is whether to limit itself to the reciprocity of duties or to target American sectors that have an important added value on the European market. “Several scenarios have been constructed,” an EU official confirmed to us. The EU also has more powerful offensive weapons in its arsenal than countervailing duties.

THE ECONOMIC ANTI-COERCION TOOL

The Commission is evaluating the possibility of using the anti-economic coercion tool to respond to Trump, in particular if the American president will use tariffs as a tool of political pressure against Europeans as he did with Mexico and Canada. The tool was designed for China, but fits perfectly with Trump's attempts to take over Greenland or impose increased defense spending through economic extortion.

The instrument allows the EU to block the import or export of goods, exclude companies from tenders, limit trade in services, foreign direct investment, protection of intellectual property and banking, insurance and financial activities. According to the Financial Times, the anti-coercion tool could be used against American "BigTechs".

POSSIBLE AGREEMENT ON LNG AND CARS?

The Europeans hope not to have to resort to their entire trade defense arsenal and to convince Trump to conclude a "deal" that will avoid the tariff war. Commissioners, member state ministers, parliamentarians and other officials have already indicated the possibility of increasing purchases of liquefied natural gas and weapons from the United States. The offer could be extended to the automotive sector.

American LNG would allow Europeans to cut imports from Russia because it is "fungible", but "it must be at a competitive price", Polish Foreign Minister Radoslaw Sikorski told the European Mattinale . “If this new Trump administration is willing to continue supplying Ukraine with its defense industrial base, the Europeans will pay the bill,” NATO Secretary General Mark Rutte said on January 23.

Bernd Lange, the president of the Trade Committee in the European Parliament, revealed that von der Leyen could offer Trump a reduction in duties on car imports from the United States.

(Excerpt from the European Mattinale )

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/ue-risposta-dazi-trump-alluminio-acciaio/ on Wed, 12 Feb 2025 07:36:57 +0000.