Summary
The European Union (EU) is set to announce a significant package of countermeasures this Thursday in response to expanded tariffs imposed by the United States on EU steel, aluminium, and related products. These tariffs, enacted in March 2025, mark an escalation of a longstanding trade dispute rooted in U.S. national security claims under Section 232 of the Trade Expansion Act of 1962. The EU’s planned measures, potentially targeting up to €18 billion worth of U.S. goods, represent a calibrated retaliation intended to protect European industries and restore trade balance while minimizing disproportionate economic impact on transatlantic relations.
This trade conflict reflects broader tensions in EU-U.S. economic relations, which have been complicated by previous tariff disputes dating back to 2018, as well as legal battles over subsidies in sectors like aerospace. The EU’s response leverages recent regulatory innovations such as the Anti-Coercion Instrument (ACI), enabling targeted action against economic coercion, and underscores the EU’s commitment to upholding multilateral trade rules within the framework of the World Trade Organization (WTO). The EU has emphasized a preference for negotiated solutions but remains prepared to enforce countermeasures to defend its trade interests if diplomacy fails.
The upcoming announcement is notable not only for its economic implications but also for its geopolitical significance, as it signals the EU’s readiness to challenge unilateral U.S. trade measures amid a shifting global trade environment marked by protectionist policies. The EU’s strategy balances regulatory and tariff-based responses, including potential measures affecting major U.S. technology firms, which serve as de facto trade barriers due to compliance costs and fines. This multidimensional approach aims to safeguard European markets while encouraging a return to fair and balanced transatlantic trade.
The development and implementation of these countermeasures have involved complex legal and political negotiations within the EU, reflecting divergent member state interests and concerns about the wider economic fallout. France, Ireland, and Italy, for example, successfully lobbied to exclude certain products from retaliation to avoid further escalation. The international trade community is closely monitoring the EU’s actions, which could set important precedents for how trade disputes are managed between economic powers in an era of increasing economic nationalism.
Background
Tensions between the European Union (EU) and the United States (US) over trade escalated significantly in early 2025 following the US government’s decision to impose tariffs on steel, aluminium, and related products imported from the EU. On 10 February 2025, the US announced a 25% tariff on all steel and aluminium imports, as well as a range of derivatives, which came into effect on 12 March 2025. This move was part of a broader protectionist stance initiated by the Trump administration, which had already introduced similar tariffs targeting €6.4 billion worth of EU goods in 2018. The stated rationale for these tariffs was national security, invoking Section 232 of the Trade Expansion Act of 1962.
In response, the EU quickly signaled its intention to defend its interests and businesses, emphasizing the need for a measured and proportionate response. European Commission President Ursula von der Leyen confirmed that the EU was finalizing an initial package of countermeasures and preparing for further actions should negotiations with the US fail. She underscored the EU’s unwillingness to absorb global overcapacity or accept dumping on its market. The EU’s countermeasures were expected to focus primarily on US steel and aluminium imports, targeting a smaller volume of US goods in order to avoid escalating the conflict disproportionately, given the EU’s larger export volume to the US compared to imports.
The dispute between the EU and US is part of a broader context of ongoing trade disagreements and negotiations. The EU and US have maintained various dialogues, including the establishment of the EU-US Trade and Technology Council (TTC) in 2021, which aims to coordinate approaches to trade, economic, and technology issues while strengthening transatlantic relations based on shared democratic values. However, these tariffs have complicated cooperation efforts and prompted the EU to invoke new mechanisms, such as the Anti-Coercion Instrument (ACI), to counter economic coercion and protect its trade interests legally within the framework of international law.
The US tariffs not only affect raw materials but also extend to derivatives and related products, and there are ongoing discussions regarding adjustments and exemptions, including tariff rate quotas and potential reductions on specific goods like pharmaceuticals and automobile parts. Meanwhile, the EU has maintained that it remains committed to finding negotiated solutions but continues to prepare for all possibilities, including deploying countermeasures if necessary. The situation reflects a wider pattern of trade tensions marked by previous disputes, such as the long-running Airbus-Boeing subsidies case at the World Trade Organization (WTO), where both parties have sought legal recourse and retaliatory measures over state aid and market competition issues.
As the EU prepares to announce its detailed countermeasure plans, the international trade community closely watches for developments that could shape the future trajectory of transatlantic trade relations and global economic stability.
Development of EU Countermeasures
The European Union has been actively developing a comprehensive package of countermeasures in response to tariffs imposed by the United States, particularly those targeting EU steel and aluminium exports. Initially, the EU proposed countermeasures on up to €95 billion worth of U.S. imports, signaling a robust response should negotiations with Washington fail to resolve the tariff disputes. These countermeasures are designed to correspond in value to the increased trade affected by the new U.S. tariffs, with the latest measures targeting approximately €18 billion worth of U.S. goods in addition to reinstated actions from 2018.
A key instrument underpinning the EU’s strategy is the recently adopted Anti-Coercion Instrument (ACI), which allows the EU to impose countermeasures against third countries employing economic coercion or weaponizing economic dependencies. The ACI permits measures targeted at specific natural or legal persons linked to foreign governments or of a general application affecting sectors or regions. Importantly, the European Commission is required to assess the potential economic impact on EU operators and seek stakeholder input before finalizing any countermeasures, thereby minimizing negative effects on the EU economy.
The procedural framework for adopting these measures involves the comitology process under Article 5 of Regulation (EU) No 182/2011, whereby EU Member States vote on proposed countermeasures by qualified majority. This step follows a period of stakeholder consultation, which for the latest package concluded on 26 March 2025, allowing affected parties to present their views and concerns. The Commission aims to implement the legal acts enforcing the new countermeasures by mid-April 2025.
Legal complexities arise from the nature of the U.S. tariffs. While the European Commission continues to characterize the tariffs as safeguard measures, several WTO panels have ruled that the 2018 U.S. steel and aluminium tariffs do not meet this classification. If the U.S. invokes national security grounds under the 1977 International Emergency Economic Powers Act for further tariffs, the EU’s basis for countermeasures under the Enforcement Regulation may weaken, potentially compelling the EU to rely more heavily on the ACI.
Beyond tariffs, the EU is also exploring regulatory avenues targeting major U.S. technology companies, whose compliance costs and fines effectively function as economic barriers that disproportionately affect American firms. This regulatory approach serves as a form of de facto tariffs, providing space for European alternatives.
Throughout the process, member states have engaged in intense lobbying to shape the scope of countermeasures. For instance, France, Ireland, and Italy successfully lobbied to exclude Bourbon whiskey from the list of targeted products after threats of retaliatory U.S. tariffs on European alcohol, while Hungary opposed the overall retaliation package. The EU leadership emphasizes that these countermeasures are intended to protect EU interests and businesses, and that all options remain open as negotiations with the U.S. continue.
Details of the Countermeasures
The European Union is preparing to implement a new package of countermeasures targeting approximately €18 billion worth of United States goods in response to the expanded U.S. tariffs enacted on March 12, 2025. These measures aim to match the increased economic impact of the U.S. tariffs, which affect a significantly higher value and broader range of European exports compared to previous rounds of trade restrictions.
The countermeasures will be enforced through a combination of suspensions of tariff concessions and other trade obligations under international agreements. Specifically, they may involve (a) suspension of tariff concessions and related obligations under the General Agreement on Tariffs and Trade (GATT) 1994 on a list of U.S. products yet to be finalized; (b) suspension of commitments under the Agreement on Subsidies and Countervailing Measures (SCM Agreement); and (c) suspension of commitments under the General Agreement on Trade in Services (GATS), including horizontal or sectoral commitments as outlined in the EU Schedule of Specific Commitments.
This initiative follows a stakeholder consultation period that began on March 12, 2025, and concluded on March 26, 2025, during which affected parties were invited to provide input on the proposed scope and products to be targeted. After assessing these inputs, the European Commission intends to finalize and implement the legal framework for the countermeasures by mid-April 2025.
The list of products subject to these countermeasures is extensive and diverse, covering a wide range of U.S. exports. In prior related actions, the EU has targeted U.S. agricultural goods such as poultry, beef, fruit, cereals (wheat, barley, oats), vegetable oils, corn, rice, and orange juice. Industrial goods, including home appliances, motorcycles, and motor boats, have also been subject to tariffs, with duty rates typically at 25%, though some items like diamonds have faced lower rates around 10%. The forthcoming package is expected to be similarly comprehensive and impactful.
Additionally, the EU has considered other forms of counteraction, including regulatory measures targeting major U.S. technology companies, which function as de facto trade barriers due to significant fines and compliance costs disproportionately affecting American firms. This approach reflects the EU’s broader strategy of maintaining leverage in the evolving trade dispute beyond traditional tariff measures.
The implementation of these countermeasures is aligned with the expiry of previous suspensions of EU retaliatory duties on March 31, 2025, making customs clearance of U.S. goods subject to the new tariffs starting April 1, 2025. The European Commission has underscored that all options remain open in responding to U.S. tariffs, signaling the potential for further escalation or negotiation depending on developments.
Legal and Regulatory Framework
The European Union’s countermeasures in response to trade disputes with the United States are principally governed by two regulatory instruments: the Enforcement Regulation and the Anti-Coercion Instrument (ACI). These frameworks enable the EU to impose targeted or sector-wide trade countermeasures against third countries that breach international trade rules affecting the EU’s commercial interests.
Under the Enforcement Regulation, the European Commission is empowered to suspend or withdraw tariff concessions and other obligations established by international trade agreements as a means of retaliation. This mechanism is designed for swift action and involves a comitology procedure whereby EU Member States must endorse proposed measures before adoption. The Commission typically consults on the products it intends to target before formally proposing the countermeasures, which are then subject to a qualified majority vote in the Council—requiring approval from at least 15 of the 27 Member States representing 65% of the EU population.
The ACI complements the Enforcement Regulation by specifically addressing economic coercion and the weaponization of economic dependencies. It allows for countermeasures either targeted at specific natural or legal persons linked to the foreign government or of general application affecting particular sectors or regions within the third country. The ACI mandates the Commission to seek input regarding the potential economic impact on EU operators before enacting or modifying any countermeasures, with a key criterion being the minimization of adverse effects on the EU economy. This requirement provides opportunities for affected businesses to advocate for exemptions or adjustments to proposed measures.
Both instruments incorporate timelines intended to expedite the adoption of countermeasures when Member States and the Commission are aligned. The EU also retains the right to pursue dispute resolution through the World Trade Organization (WTO) dispute settlement mechanism. Complaints can be lodged against WTO members for breaches of WTO rules, and the EU may seek authorization to impose retaliatory measures following adjudication. For instance, in the longstanding EU-US dispute over subsidies to Boeing, the WTO authorized the EU to impose countermeasures on US goods and services up to a value of $4 billion annually.
However, not all requests for countermeasures by the EU have been upheld. In a recent case concerning NASA and Department of Defense research and development subsidies, the WTO arbitrator denied the EU’s request to impose tariffs on US imports, limiting the scope of lawful EU countermeasures under WTO law.
The regulatory frameworks governing these measures highlight the complexity of balancing swift enforcement with adherence to international trade law and the minimization of collateral economic damage within the EU. Moreover, political and diplomatic considerations continue to influence the implementation and negotiation of these trade countermeasures between the EU and the United States.
Implications and Reactions
The proposed EU countermeasures against U.S. tariffs, which could affect up to €95 billion worth of U.S. imports, have elicited significant attention from various stakeholders, highlighting the broader implications for transatlantic trade and geopolitical relations. These measures are intended as a calibrated response to tariffs imposed by the U.S. on European steel, aluminium, and other goods, aiming to restore fair competition and address economic harm suffered by EU exporters.
Economically, the countermeasures could impact a wide range of U.S. products, including industrial and agricultural sectors such as textiles, leather goods, home appliances, plastics, and wood products. While the EU seeks to impose proportionate retaliation, the potential for increased consumer prices and reduced output in the U.S. economy remains a concern, as higher tariffs generally decrease the after-tax value of labor and capital income, possibly discouraging work and investment. Furthermore, the regulatory actions against U.S. tech companies by the EU have been characterized as a form of de facto tariffs, adding another layer of economic barriers for American firms and fostering space for European competitors.
Politically, the EU continues to emphasize the importance of negotiated solutions, with Commission President Ursula von der Leyen affirming the EU’s commitment to dialogue while preparing for all outcomes. The EU’s approach seeks to avoid escalation, reflected in the decision to target a smaller volume of U.S. imports than the scale of American tariffs would suggest, partly due to the trade imbalance favoring EU exports to the U.S.. Nonetheless, Brussels has made clear that continued non-compliance by the U.S. would leave it no choice but to exercise its rights under international trade rules.
From a strategic perspective, these developments underscore shifting dynamics in global trade. The EU’s willingness to respond firmly to U.S. tariffs signals its determination to uphold multilateral trade norms amid increasing protectionism. Additionally, the EU’s existing network of trade agreements worldwide may help mitigate some adverse effects by providing alternative markets and strengthening domestic demand. The situation also highlights potential challenges in resolving trade disputes under current WTO frameworks, as the EU acknowledges limitations in achieving fully WTO-compatible agreements with the U.S. at this stage.
Timeline of Key Events
- March 12, 2025: In response to the United States’ new tariffs that came into force on this date, the European Commission launched the process to impose additional countermeasures against the U.S. Stakeholder consultations were initiated under Article 9 of Regulation (EU) No 654/2014, inviting input on the planned countermeasures related to U.S. steel and aluminium tariffs. The consultation period closed on March 26, 2025, followed by the Commission’s consolidation and assessment of the inputs, and consultation with EU Member States on the draft implementing measures.
- March 31, 2025: The suspension of previous EU countermeasures expired, making goods customs cleared into the EU from April 1, 2025, subject to additional duties
Related Trade Disputes and Precedents
The European Union (EU) and the United States have a long history of trade disputes, particularly centered on allegations of unfair subsidies and tariffs. Since the establishment of the World Trade Organization (WTO) in 1995, the EU has been actively involved in 201 WTO cases, acting as a complainant in 110 and as a respondent in 91, often negotiating trade agreements to reduce tariffs and facilitate trade with third countries.
One of the most prominent disputes involves aerospace subsidies. The EU filed a case against US subsidies to Boeing, while the US launched a parallel WTO case concerning state aid granted to Airbus. This protracted conflict culminated in 2019 when the WTO authorized the US to impose countermeasures worth nearly US$7.5 billion against the EU. However, the WTO dispute settlement panel rejected certain EU arguments, such as claims that Boeing’s post-2006 aeronautics research and development subsidies conferred technological advantages affecting multiple aircraft models beyond those originally contested. The panel also dismissed EU claims regarding Boeing’s pricing behavior linked to these subsidies, though it upheld some serious prejudice findings related to specific sales campaigns and tax reductions in Washington State affecting single-aisle aircraft prices.
More recently, trade tensions escalated in 2018 when the US imposed tariffs of 25% on steel and 10% on aluminum imports from the EU, citing national security concerns. The EU retaliated with its own tariffs, and the US threatened further tariffs on EU automobiles and auto parts, exacerbating the trade dispute atmosphere. The baseline 10% tariffs imposed on the EU from April 5 added to the uncertainties, with questions remaining about whether EU member states would lift their sanctions in response to US actions.
The EU’s approach to countering US tariffs is complicated by WTO rules, particularly Article XXIV, which governs the formation of free-trade agreements (FTAs). The European Commission’s director-general for trade, Sabine Weyand, has acknowledged that the current measures do not amount to a full WTO-compatible FTA and that the US would likely reject any such proposition at this stage. Additionally, there are legal concerns that some EU actions aimed at redressing WTO violations may themselves contravene the WTO’s Dispute Settlement Understanding (DSU), as enforcement through countermeasures could conflict with established WTO dispute procedures.
Moreover, US tariffs on other global markets could indirectly affect the EU by causing affected countries to redirect their exports away from the US and into Europe, potentially increasing competition for EU companies. This interconnectedness highlights the complexity and high stakes involved in the ongoing trade disputes and the EU’s forthcoming countermeasures.
The content is provided by Avery Redwood, Front Signals
