Summary
The European Union (EU) is set to unveil a bold new strategy this Thursday aimed at countering escalating tariffs imposed by the United States (US) on European goods. These tariffs, initially introduced during the Trump administration and subsequently expanded, have significantly strained transatlantic trade relations by affecting sectors such as steel, aluminum, automobiles, and a wide range of other products totaling approximately €380 billion in EU exports. The EU’s response marks a strategic evolution in its trade defense policies, balancing firm countermeasures with a commitment to preserving a rules-based international trading system and maintaining dialogue with the US.
Central to the EU’s approach is the deployment of additional retaliatory tariffs on key American imports including motorcycles, bourbon whiskey, and agricultural products, introduced through recent regulatory measures. Alongside traditional countermeasures, the EU is prepared to activate its 2023 Anti-Coercion Instrument (ACI)—a newly adopted legal framework designed to more effectively address coercive economic practices by third countries. This “Trade Bazooka” empowers the EU to respond flexibly and credibly to unfair trade actions, signaling a more assertive stance if negotiations with the US fail.
The strategy reflects both political and economic considerations: EU leaders emphasize the harms that tariff wars inflict on consumers and businesses on both sides of the Atlantic, including inflationary pressures and disrupted supply chains, while underscoring their preference for negotiation over escalation. However, there remains broad consensus within the EU that robust retaliation is necessary to uphold WTO rules and protect vital sectors from what it views as unlawful US safeguard measures.
This development has prompted varied reactions among EU member states and trade experts, with debates ongoing about the scale and targets of countermeasures to avoid an uncontrolled tit-for-tat trade war. The upcoming announcement thus represents a pivotal moment in EU-US trade relations, as the bloc seeks to defend its economic interests, deter further US tariff hikes, and navigate a complex landscape of international trade law and diplomacy.
Background
Tensions between the European Union (EU) and the United States (US) over trade tariffs have been a recurring issue, particularly intensified during the administration of former US President Donald Trump. The US initially imposed a 20% “reciprocal” tariff on goods imported from the EU, which was later paused for 90 days and reduced to 10% to allow for negotiations. Trump’s tariff strategy extended beyond the EU, targeting various countries and sectors with tariffs, particularly steel, aluminum, and automobiles, which played a significant role in his administration’s trade policy.
The EU responded by preparing and implementing countermeasures, including retaliatory tariffs on US products such as motorcycles and bourbon whiskey. These countermeasures were grounded in findings that the US tariffs violated international trade agreements, specifically the World Trade Organization (WTO) Agreement on Safeguards. The EU has emphasized adherence to WTO rules and has pursued consultations and potential dispute settlement mechanisms within the WTO framework to resolve these conflicts.
Over time, the scope of US tariffs on EU imports expanded significantly. By 2025, US tariffs covered around 380 billion euros, equating to 70% of EU goods trade to the US, with potential increases to 97% as further investigations targeted pharmaceuticals, semiconductors, and critical minerals. The EU, however, has been cautious in matching US tariff scope, notably excluding some sensitive sectors such as pharmaceuticals and semiconductors from its own retaliatory measures.
The EU’s response has also included the potential use of its Anti-Coercion Instrument (ACI), a newly developed tool designed to counteract coercive economic measures by third countries. Although not yet employed, the EU has signaled its readiness to use the ACI to safeguard its interests if necessary. Political leaders within the EU have uniformly pledged a decisive and robust response to any “unfairly or arbitrarily” imposed US tariffs, while simultaneously striving to avoid a damaging tariff war through diplomatic engagement.
The ongoing trade frictions have led to the establishment of cooperative forums such as the EU-US Trade and Technology Council (TTC), launched in 2021, which aims to address trade and technology issues, including tariffs, through dialogue and technical cooperation. Despite these efforts, the US continued to consider higher tariff rates, such as the proposed 30% tariffs on EU products, which accelerated the EU’s decisions to impose further countermeasures.
The complex interplay of tariffs, retaliatory measures, and negotiations underscores the strategic importance of the upcoming EU announcement, where the bloc is set to reveal a bold new strategy to counter US tariffs and protect its economic interests on the global stage.
New EU Strategy on US Tariff Countermeasures
In response to the imposition of 30% tariffs on European Union (EU) products by the United States under the Trump administration, the EU has formulated a new, more assertive strategy of countermeasures designed to address these trade challenges while adhering strictly to international legal frameworks. This latest package replaces previously suspended countermeasures and is based on invoking violations of the World Trade Organization (WTO) Agreement on Safeguards by the U.S.
On July 24, the European Commission officially announced the imposition of these new countermeasures following agreement among EU Member States. The measures include additional customs duties on a range of U.S. imports, introduced through Commission Implementing Regulation (EU) 2025/1564, and reflect the EU’s intention to respond proportionately yet firmly to U.S. tariffs. These tariffs are expected to target American products such as motorcycles, poultry, fruit, and wood, with a phased implementation beginning shortly after announcement and continuing through the end of the year.
The EU’s strategic approach emphasizes maintaining a rules-based trading system while retaining flexibility to negotiate a balanced and mutually beneficial trade agreement with the U.S. This preference for engagement is coupled with the readiness to escalate countermeasures if necessary, reflecting an understanding of the economic harm caused by tariff wars and the importance of preserving transatlantic trade relations.
Central to the EU’s new strategy is the potential deployment of the 2023 EU Anti-Coercion Instrument (ACI), often dubbed the “Trade Bazooka.” The ACI empowers the EU to implement targeted and credible trade countermeasures against coercive actions by third countries more effectively than under previous regulations such as Regulation (EU) No 654/2014 (the Enforcement Regulation). The instrument defines economic coercion as measures applied or threatened to interfere in the sovereign decisions of the EU or its Member States by affecting trade or investment, and its use is being seriously considered should trade negotiations with the U.S. fail.
Prior to activating the ACI, the EU relied on the Enforcement Regulation for its responses, a mechanism that allows swift imposition of trade countermeasures to rebalance concessions disrupted by safeguard measures from third countries. However, the ACI provides a more refined legal avenue for counteraction, reflecting a strategic evolution in the EU’s trade defense toolkit prompted by the increasing complexity of international trade disputes.
The EU’s calibrated response is also influenced by concerns about the broader economic impacts of tariffs. EU leaders have highlighted that imposing tariffs on U.S. goods will ultimately tax U.S. consumers and businesses, exacerbating inflationary pressures. EU officials have underscored the principle of deterrence and resilience, with statements emphasizing the EU’s capability to resist, retaliate, and protect vital sectors against unfair trade practices.
Reactions to the New Strategy
The European Union’s announcement of a bold new strategy in response to U.S. tariffs has elicited a range of reactions from political leaders, trade experts, and member states, reflecting both cautious optimism and strategic deliberation. Many EU officials emphasize the importance of a calibrated approach that balances firmness with the desire to avoid a full-scale trade war.
Several EU leaders have expressed a preference for negotiation over escalation. The European Commission has reiterated its “clear preference” for engaging in talks with the U.S. administration to achieve a balanced and mutually beneficial trade agreement, with French Trade Minister Laurent Saint-Martin highlighting that “a tariff war is harmful for everyone”. This conciliatory stance underscores the EU’s initial reluctance to deploy its most potent tools immediately.
Nonetheless, member states are seriously considering more assertive measures should negotiations fail. The newly adopted 2023 EU Anti-Coercion Instrument (ACI), sometimes dubbed the “Trade Bazooka,” represents a significant shift in the EU’s defensive trade policy, enabling targeted countermeasures against coercive economic practices. Discussions are ongoing about imposing two lists of countermeasures targeting U.S. products, including a potential second wave aimed at cars and reciprocal tariffs, with further measures possibly addressing the U.S. trade surplus in services.
Some EU leaders prefer a more measured response by imposing selective counter-tariffs aimed at specific U.S. exports, such as bourbon from Kentucky, to apply political pressure on Republican-leaning states without triggering an uncontrollable tit-for-tat escalation. This approach reflects a strategic effort to demonstrate resolve while avoiding excessive economic disruption.
Members of the European Parliament have underscored the inevitability of reaction following U.S. tariff impositions. Bernd Lange, chair of the Parliament’s international trade committee, warned that tariffs would tax U.S. citizens themselves, raising costs and fueling inflation, while Sophie Wilmès, vice-chair of the Parliament’s delegation for relations with the U.S., emphasized that “our first line of defence is dissuasion,” affirming Europe’s capacity to retaliate and protect its key sectors. Similarly, European Commissioners have highlighted that tariffs are harmful to both businesses and consumers, reinforcing the need for a principled, rules-based response.
Strategically, the EU aims to maintain a rule-based international trading system while engaging with the U.S. on multiple fronts, including facilitating bilateral trade, cooperating on economic security, and deterring further tariff increases through credible retaliation threats. This multifaceted approach illustrates the EU’s intent to balance assertiveness with diplomacy.
Finally, the European Commission president signaled readiness to escalate countermeasures if necessary, stressing vigilance against indirect effects of U.S. tariffs and the EU’s refusal to tolerate dumping or global overcapacity impacting its markets. This statement signals a firm stance, preparing the EU to protect its interests and businesses should negotiations falter.
Potential Impact and Implications
The imposition of tariffs by the United States on European Union products is poised to have significant economic repercussions on both sides of the Atlantic. For EU firms, these tariffs threaten to disrupt complex global supply chains, increasing the difficulty and cost of sourcing certain products. This uncertainty surrounding tariffs could prompt businesses to delay or reduce investments, thereby dampening economic growth within the EU. At the same time, higher tariffs would lead to increased prices for US consumers and businesses, effectively acting as a tax on American citizens and potentially fueling inflation.
The EU’s response is expected to be multifaceted. Initial countermeasures targeting US products are already under discussion, with a first wave of tariffs planned for mid-April and further retaliatory measures contemplated to come into force by the end of the month. These may extend beyond goods to services, where the US currently holds a trade surplus with the EU. The EU is also considering deploying its newly adopted Anti-Coercion Instrument (ACI), which provides broader flexibility in the types of countermeasures it can impose, potentially affecting business licenses and intellectual property rights. This escalation signals a shift toward more robust economic defense mechanisms by the EU in response to perceived coercive trade practices.
The broader economic implications of this tariff conflict include a projected 0.3 percent contraction of Europe’s gross domestic product over the next two years due to the new US tariffs, which impact approximately €380 billion in European exports. The resulting trade tensions may encourage European countries to strengthen internal cooperation and seek closer trade ties among themselves and with other partners to offset US actions.
From a strategic standpoint, these developments could reshape transatlantic trade relations. While the US administration advocates that tariffs will generate substantial revenue, reduce trade imbalances, and incentivize domestic production and reshoring, these measures risk provoking retaliatory actions that could escalate into a full-scale trade war, raising costs for businesses and consumers in both economies. The EU’s potential use of the ACI underscores its intent to deter economic coercion and defend its commercial interests in a more assertive manner, possibly leading to a protracted period of negotiation and conflict resolution attempts, including through the World Trade Organization’s dispute settlement mechanisms—though the latter’s effectiveness is currently limited by procedural constraints.
Timeline and Future Developments
The timeline of EU countermeasures in response to US tariffs has been marked by a series of regulatory decisions and ongoing negotiations. Initially, the European Commission suspended retaliatory tariffs following discussions with the United States, as set out in Commission Implementing Regulation (EU) 2023/2882 of 18 December. This suspension was effective until 31 March 2025, allowing time for both parties to seek a longer-term solution to the tariff disputes.
However, following the introduction of new US tariffs on 12 March 2025, the EU announced that the suspension would lapse on 31 March 2025. Consequently, from 1 April 2025, the EU reinstated its countermeasures, imposing tariffs ranging from 10% to 50% on a variety of US products, including boats, bourbon, and Harley Davidson motorcycles. Alongside the reinstatement, the Commission planned to adopt additional countermeasures by mid-April, targeting approximately €18 billion of US exports, to align the EU’s response with the increased value of affected trade.
Looking ahead, the EU has indicated that further negotiations with the US will continue to fully implement any political agreements reached, emphasizing ongoing diplomatic engagement despite the imposition of tariffs. If negotiations fail, particularly concerning the threatened increases under the International Emergency Economic Powers Act (IEEPA) tariffs, the EU has prepared to activate further countermeasures starting from 7 August 2025. EU Member States are considering utilizing the Anti-Coercion Instrument (ACI) against the US in such a scenario, though the precise form of these countermeasures remains unclear, especially if the US maintains Section 232 tariffs characterized by the Commission as safeguard measures departing from WTO obligations.
Throughout this period, EU institutions, including the European Parliament and the Commission, have actively engaged in debates and consultations on the economic impacts of these countermeasures, seeking to balance effective retaliation with minimizing harm to EU economic operators. This process also provides opportunities for businesses to advocate for exemptions from certain measures.
The retaliatory tariffs are primarily a response to US levies, including a previously announced but paused 20% tariff and ongoing tariffs on cars, which continue to affect transatlantic trade relations. The evolving situation reflects a complex interplay of trade policy, diplomacy, and economic interests as the EU prepares to reveal its next steps in addressing US tariff challenges.
The content is provided by Harper Eastwood, Front Signals
