The EU will react ‘firmly and immediately’ against what it calls unjustified barriers to free and fair trade following President Trump’s new reciprocal trade policy.
President Trump has repeatedly said Europe treats the US unfairly, citing the example that the EU imposes a 10% tariff on imported cars while the US only imposes a 2.5% tariff. The US has imposed a 25% import tax on all steel and aluminium.
The European Commission views President Trump’s proposed reciprocal trade policy as a step in the wrong direction, according to a statement.
“The EU remains committed to an open and predictable global trading system that benefits all partners,” it states.
“The EU maintains some of the lowest tariffs in the world and sees no justification for increased US tariffs on its exports. Tariffs are taxes. By imposing tariffs, the US is taxing its own citizens, raising costs for business, stifling growth and fuelling inflation. Tariffs heighten economic uncertainty and disrupt the efficiency and integration of global markets.”
It went on to say that Europe believes in trade partnerships that are mutually beneficial and balanced, grounded in transparency and fairness.
“That is also why the EU has the largest and fastest growing network of trade agreements in the world. The EU has negotiated and concluded over three times as many trade agreements as the US,” it adds.
In Trump’s first Presidency, the EU’s import of LNG increased substantially but it didn’t move the needle on the overall goods trade surplus.
The US is already the largest LNG supplier to the EU, with 40% of the EU’s LNG imports coming from the US in the third quarter of 2024, so there isn’t much room for manoeuvre on a prospective new deal.
European options
Europe could impose export tariffs on goods that are of strategic importance to the US. In 2022, the US relied on the EU for 32 strategically important import products, mainly in the chemical and pharmaceutical sectors, according to ING THINK economic and financial analysis.
“The EU could use this as a form of leverage in trade negotiations but should be aware of the US doing the same, potentially curbing chemical exports to Europe.
The ‘ultimate retaliation’ would be a digital services tax, it adds. “While the EU enjoyed a substantial trade surplus in goods with the US, amounting to €156bn in 2023, this was mostly offset by a significant trade deficit in services, which reached €104bn in the same year.”
“Trade wars will not be won by the trade surplus country. It is always the surplus countries that have more to lose. Therefore, Europe might want to consider another route: the strengthening of the domestic economy.”
