The European Union has begun outlining its response to the sweeping new tariffs imposed by U.S. President Donald Trump, signalling a desire to negotiate but making clear it will retaliate if talks fail. The bloc has condemned the move as economically damaging, legally unjustified, and politically reckless — yet remains divided on how hard to hit back.
Trump’s so-called “reciprocal tariffs,” unveiled in the Rose Garden last week, impose a 20% duty on most EU exports to the U.S., adding to earlier levies on steel, aluminium, cars, and car parts. The combined tariffs affect around 70% of the EU’s €532bn in exports to the U.S., Europe’s largest external trading partner. They come as part of a broader global tariff regime targeting over 180 countries and territories.
Initial EU response: delay, prepare, and unify
The EU has so far delayed full-scale retaliation, instead preparing a phased and targeted response. A first round of countermeasures—likely to apply to up to €28bn of U.S. imports—will be voted on this week and is expected to take effect in two stages from mid-April. Products earmarked include emblematic American exports like bourbon, blue jeans, motorcycles, chewing gum, and toilet paper. Steel, aluminium and derivative goods are also included.
The European Commission, which handles trade policy for the bloc, is aiming to present a united front. Trade ministers from the 27 member states met in Luxembourg on Monday in the first collective discussion since Trump’s announcement. Officials said the bloc’s “overriding priority” remains avoiding a trade war through negotiation—but it will escalate if needed.
European Commission President Ursula von der Leyen has framed the tariffs as a “major blow to the world economy,” warning that “uncertainty will spiral” and trade disruption will have “dire consequences.” Still, she stressed Europe’s openness to dialogue: “Let’s move from confrontation to negotiation.”
Divisions among member states
EU unity, however, masks deeper divisions. France and Germany have urged a tougher stance, with President Emmanuel Macron calling for companies to suspend U.S. investments and suggesting retaliatory measures. Macron declared the tariffs “brutal and unfounded,” while Germany’s Olaf Scholz labelled them “fundamentally wrong.”
Spain and Italy, by contrast, have urged restraint. Italian Economy Minister Giancarlo Giorgetti warned against “panic button” responses and advocated for a negotiated resolution. Spain’s economy minister Carlos Cuerpo echoed the need to “avoid a policy of retaliatory tariffs which would just be damaging for all.”
Even within countries, sectoral concerns complicate the picture. Trump has threatened a 200% tariff on European wines and spirits if the EU proceeds with a 50% duty on bourbon—leading wine-exporting countries like France and Italy to quietly push for bourbon’s removal from the target list.
The threat of escalation: services and Big Tech
Behind the scenes, EU officials are preparing a broader retaliatory arsenal, should initial countermeasures fail to shift the U.S. stance. Most notably, attention is turning toward U.S. dominance in the European services sector—particularly Big Tech.
The EU has a €157bn trade surplus with the U.S. in goods, but the U.S. enjoys a €109bn surplus in services. That imbalance gives the EU leverage if it decides to act through its new Anti-Coercion Instrument (ACI), which allows the bloc to restrict market access for foreign firms engaged in economic coercion.
Options under consideration include:
- Delaying or denying licences for U.S. financial and tech firms.
- Limiting access to EU public procurement contracts.
- Tightening regulation on data usage.
- Revisiting taxation of digital services, despite resistance from Ireland and others hosting U.S. tech headquarters.
France has been particularly vocal. Finance Minister Eric Lombard floated stricter data regulations and possible taxes on U.S. digital activity. But such measures are seen as the “nuclear option” due to their potential to hurt European consumers and escalate the trade conflict.
Macroeconomic fallout: GDP hit, inflation risk, market turmoil
The economic fallout is already beginning. ING economists estimate the tariffs could cut eurozone GDP growth by 0.3 percentage points over the next two years. European exports to the U.S. surged ahead of the tariffs but are expected to fall sharply now that they’re in place.
Markets have reacted with volatility. The eurozone’s economic outlook has darkened, and financial analysts are reducing growth forecasts across the board. The ECB faces pressure to recalibrate its interest rate trajectory amid what ING calls a “negative trade and confidence shock.”
Inflation impacts remain uncertain. While tariffs may raise import prices, disinflationary pressures from global oversupply and falling demand could counteract that. JP Morgan has raised its global recession odds to 60%.
Meanwhile, France estimates that the tariffs could slash its GDP by over 0.5 percentage points, with officials warning of significant job losses in export-heavy industries such as aeronautics, wine, and luxury goods.
The road ahead: hard choices and high stakes
While Brussels continues to signal openness to negotiation, EU trade chief Maroš Šefcovic warned that “unjustified tariffs inevitably backfire,” and promised a “calm, carefully phased, unified” response.
A broader, escalatory round of EU countermeasures remains under active consideration. But such steps—particularly those targeting services—require a qualified majority of EU members and an eight-week implementation period under the ACI.
The ultimate question is whether Trump can be brought to the negotiating table. EU officials hope that a mixture of calibrated retaliation, strategic restraint, and international coordination with allies like Canada and China will create the pressure necessary to prompt a U-turn.
