Summary
The European Union (EU) is poised to unveil a comprehensive package of retaliatory measures against tariffs recently imposed by the United States (US), marking a significant escalation in ongoing transatlantic trade tensions. The US, citing national security concerns, introduced 25% tariffs on steel and aluminum imports from the EU in early 2025, extending these duties to related products such as aluminum drink cans and canned beer. In response, the EU plans to target a broad array of American goods—including agricultural products like bourbon, tequila, soybeans, and industrial items such as airplane parts and car components—with tariffs amounting to approximately €18 billion.
This dispute is rooted in a series of US trade policies beginning in 2018, which have aimed to protect domestic manufacturing but have also raised input costs for downstream industries, resulting in job losses and increased production expenses in both countries. The EU’s retaliation not only seeks to offset the economic harm caused by US tariffs but also to uphold World Trade Organization (WTO) rules, challenging the legality of the US measures through formal WTO dispute settlement proceedings. The European Commission has emphasized a calibrated approach that balances targeted trade actions with continued dialogue, including phased tariff implementations and consultations with member states and industry stakeholders.
The EU’s response is further shaped by its Anti-Coercion Instrument (ACI), a legal framework designed to counteract coercive trade practices through a combination of tariffs, trade restrictions, and litigation. While the EU currently prioritizes negotiated solutions, it has not ruled out more extensive retaliatory measures, including potential tariffs on US service sectors, notably major technology companies, should talks fail to produce results. This multifaceted strategy underscores the EU’s intent to protect its economic interests, maintain global supply chain stability, and reinforce the primacy of multilateral trade rules amid a complex and evolving geopolitical landscape.
The transatlantic trade dispute reflects broader challenges in US-EU economic relations, given their status as the world’s largest bilateral trading partners and deeply integrated markets. The ongoing tensions highlight the difficulties in balancing domestic industrial policy objectives with international trade commitments, with significant implications for global markets, manufacturing employment, and diplomatic relations. Stakeholders across industries and governments continue to monitor the situation closely as the EU’s upcoming announcement is expected to influence the trajectory of US-EU trade relations in the near term.
Background
Trade tensions between the European Union (EU) and the United States (US) have escalated significantly in recent years, primarily revolving around tariffs imposed by both sides. In March 2025, the US government enacted 25% tariffs on steel and aluminum imports, citing national security concerns and aiming to bolster domestic production. These measures were expanded in April 2025 to include products such as empty aluminum drink cans and canned beer. The US tariffs followed earlier actions in 2018, when similar tariffs caused metal prices to rise and import volumes to decline, but also led to job losses in industries dependent on steel inputs despite some gains in domestic production.
In response to the US tariffs, the EU proposed retaliatory duties primarily targeting US steel and aluminum imports, amounting to approximately €21 billion per year. These countermeasures, mostly set at 25%, cover a range of products including motorcycles, poultry, fruit, wood, clothing, and dental floss. The EU’s actions represent the first stage in its broader response to the US trade policies and are designed both to pressure the US into negotiations and to prepare for the possibility that higher tariffs may become a long-term feature of transatlantic trade relations.
The EU and US maintain the world’s largest bilateral trade and investment relationship, characterized by extensive integration in goods, services, and investment flows. In 2022 and 2023, the EU was the US’s second largest goods export partner and largest goods import partner, while the US remained the EU’s top partner in services trade. Given this interdependence, tariffs have the potential to disrupt global supply chains, increase costs, and impact employment across various sectors.
Studies assessing the impact of these tariffs have found that while steel and aluminum-producing industries in the US saw modest production increases, downstream industries faced declines due to higher input prices, resulting in net negative effects on manufacturing employment and production costs. The US Department of Agriculture also estimated that retaliatory tariffs imposed by the EU and other countries caused direct export losses of $27 billion from 2018 through 2019.
The dispute between the EU and US has extended beyond tariffs into the realm of the World Trade Organization (WTO). The EU has consistently maintained that US tariffs violate fundamental WTO rules and has initiated dispute settlement proceedings to challenge these measures. In April 2025, the European Commission announced plans to launch a WTO dispute against US reciprocal tariffs, including those on cars and car parts, emphasizing the EU’s position that these duties are unjustified. Previous WTO rulings have limited the EU’s ability to impose countermeasures in certain subsidy-related cases, reflecting the complexity and ongoing nature of trade disputes between the two entities.
Given the volatility of the situation and its far-reaching implications, companies and policymakers alike have been urged to develop adaptive strategies that can respond to changing trade policies, comply with new regulations, and mitigate tariff-related costs. Collaborative approaches, including working with other affected countries on joint dispute settlement cases, have also been proposed as means to strengthen responses to US tariff measures.
EU Response to U.S. Tariffs
The European Union (EU) has taken a measured yet resolute approach in responding to the extensive tariffs imposed by the United States, particularly targeting EU steel, aluminum, and other exports. The initial retaliatory measures adopted by the EU cover approximately €21 billion worth of U.S. imports, slightly less than the €26 billion targeted by U.S. tariffs on EU exports of steel and aluminum. These EU tariffs are being phased in gradually, with some duties taking effect as early as April 15, others on May 15, and a smaller portion delayed until December 1, reflecting the EU’s intention to allow space for negotiations with the U.S. and to avoid immediate economic disruption.
The EU’s strategic response includes multiple options. On one hand, the EU may choose to refrain from retaliation and seek negotiated tariff reductions or exemptions, potentially combining these efforts with monetary policy measures to mitigate adverse effects. On the other hand, the EU has activated its Anti-Coercion Instrument (ACI), a framework designed to counteract external economic pressure through calibrated retaliatory tariffs, trade restrictions, and litigation efforts. The ACI notably allows the EU to address trade practices that are coercive or discriminatory and to prepare for a broad range of market impacts including price shifts and supply chain interruptions.
Consultations have been ongoing with EU member states, industry stakeholders, and the European Commission to identify and finalize the scope of retaliatory measures. This consultative process is governed by Regulation (EU) No 654/2014 and involves stakeholder feedback via an EU Survey to determine the affected products and inform policy decisions. The products subjected to retaliation include U.S. exports such as soybeans, copper, and motorcycles. Further consultations and member state approvals are part of the comitology procedure, with legal acts imposing countermeasures expected to be adopted by mid-April 2025.
The EU has also kept the option open for escalated measures beyond tariffs, including potential tariffs on American service sectors, notably targeting major U.S. technology firms like Google. This “bazooka” approach is under consideration should negotiations fail or if U.S. tariffs persist or intensify. The staggered implementation and phased retaliation demonstrate the EU’s dual aim: to protect its economic interests and to maintain a platform for constructive dialogue with the United States.
Parallel to these economic responses, the EU has committed to using the World Trade Organization (WTO) dispute settlement mechanism to challenge the legality of the U.S. tariffs. The EU contends that these tariffs violate fundamental WTO rules and has formally requested consultations through the WTO to seek a negotiated resolution while preserving the option of arbitration or litigation. This WTO engagement is part of the EU’s broader strategy to reaffirm international trade rules and challenge unilateral trade actions taken by the U.S.
Upcoming EU Actions
The European Union (EU) is preparing to formally respond to the recent United States (US) tariffs by unveiling a list of countermeasures targeting a wide range of American goods. These actions are part of the EU’s broader objective to reaffirm the importance of internationally agreed trade rules and to ensure that no World Trade Organization (WTO) member, including the US, unilaterally disregards such rules. The countermeasures, expected to be revealed this Thursday, include tariffs on hundreds of agricultural and industrial products, such as bourbon, tequila, soybeans, meats, sewing machines, airplane parts, and car components. This selection aims to balance the pressure on the US while avoiding an outright trade war escalation.
The EU’s response follows the imposition of up to 25% tariffs by the US on steel, aluminium, and related products from the EU and other partners earlier in March 2025. In retaliation, the European Commission launched a process to impose additional tariffs on approximately €18 billion worth of US goods, complementing earlier measures reimposed from 2018. The EU has also delayed the imposition of the first countermeasures from an initial mid-April deadline to August 6 to allow more time for negotiations, signaling a willingness to reach a negotiated solution with the US.
Strategically, the EU aims to maintain its commitment to openness, climate transition, and defense spending while engaging bilaterally with the US to avoid the tariffs’ escalation. The EU’s approach involves carefully choosing targets for tariffs to exert economic pressure without provoking a full-scale trade conflict, thereby encouraging the US to return to the bargaining table. This includes working alongside other affected countries to initiate joint dispute-settlement cases if necessary.
Furthermore, the EU acknowledges the sensitive nature of agricultural tariffs for both parties and is seeking to balance its objectives, which include the elimination of tariff and non-tariff barriers, especially in agriculture, an area particularly important to the EU. Despite the possibility of retaliation, the EU remains committed to pursuing negotiated outcomes and adhering to WTO processes, including lodging formal requests for consultations under dispute settlement mechanisms.
In the broader context, the EU’s planned retaliatory tariffs are part of a structured response combining litigation, diplomacy, and targeted trade measures under the framework of the Anti-Coercion Instrument (ACI), designed to counter arbitrary trade practices and protect European businesses from disruptions in supply chains and market access. This strategy reflects the EU’s intent to safeguard its economic interests while upholding international trade norms.
U.S. Domestic Motivations for Tariffs
The Trump administration implemented a series of tariffs in 2018 primarily aimed at boosting domestic manufacturing and protecting key industries such as steel and aluminum. One of the central motivations cited by the White House was to strengthen the domestic manufacturing sector by reducing reliance on imported goods and encouraging production within the United States. For example, the administration argued that tariffs would increase domestic manufacturing output and generate significant tax revenue, estimating $100 billion in additional tax income. The administration also highlighted that about 50% of the 16 million cars bought by Americans in 2024 were imported, thereby using tariffs on vehicles and parts as leverage to promote domestic automotive production.
However, the tariffs also led to unintended consequences. Despite the initial goal of job creation in manufacturing, a Federal Reserve Board of Governors study found that increased input costs resulting from the tariffs contributed to approximately 75,000 fewer jobs in the domestic manufacturing sector. The tariffs raised prices for critical inputs like steel and aluminum, with the US Midwest Premium increasing by 20% for steel and 65% for aluminum year-to-date, leading to higher production costs for downstream manufacturers. This price inflation placed a significant burden on industries reliant on these metals, causing a decline in US steel production by 2% year-on-year during the first four months of 2025, while global steel production also dropped by 1% over the same period.
The policy aimed to protect American industries by making imports more expensive, thereby encouraging domestic production and employment. However, sectors that use steel and aluminum as inputs employed over twelve million Americans in 2018 and experienced adverse effects from the price hikes and reduced availability of these materials. This dynamic led to a mixed outcome where any gains in steel production jobs were potentially offset by losses in other manufacturing sectors.
Stakeholder Reactions and Positions
The European Union has emphasized the importance of adhering to internationally agreed rules, underscoring that no World Trade Organization (WTO) member, including the United States, can unilaterally disregard these commitments. In response to the ongoing trade disputes and tariff impositions by the US, the EU has formally sought consultations to resolve conflicts through negotiation rather than escalation. European Commission President Ursula von der Leyen reiterated the EU’s commitment to finding negotiated outcomes with the US despite rising tensions.
The EU’s recent vote to pursue retaliatory measures followed the Trump administration’s announcement of 25% tariffs on European steel and aluminum. While the EU is still formulating its response to other US tariffs, it is consulting with stakeholders on potential commercial policy measures, including tariffs and trade restrictions, to counteract the impact of US actions. These consultations are governed by Regulation (EU) No 654/2014, aiming to gather comprehensive input on affected products and sectors.
Businesses across sectors are advised to prepare for broad market impacts stemming from potential EU retaliatory measures, including price adjustments, supply chain disruptions, and possible restrictions on market access. The EU’s Anti-Coercion Instrument (ACI) plays a central role in the bloc’s strategy to counteract arbitrary US trade policies, such as the Buy American Act, which fall outside the ACI’s scope but contribute to general protectionist pressures. This structured approach combines retaliation, litigation, and diplomacy to address trade coercion comprehensively.
A notable point of contention relates to rules of origin and production relocation strategies employed by companies to circumvent tariffs. For example, if a US company relocates production to a third country but the majority of parts still originate from the US, the EU may apply the “major portion rule” to classify the product as US-origin, subjecting it to tariffs. This approach was reinforced by a WTO judgment emphasizing the need to assess intent and require economic justification for production moves, placing additional compliance burdens on companies.
On the broader diplomatic front, the EU and US have continued to engage in dialogue to address trade frictions. The launch of the U.S.-EU Trade and Technology Council (TTC) in 2021 illustrates efforts to cooperate on issues including the WTO Boeing-Airbus subsidies dispute, digital services taxes, and Section 232 tariffs on steel and aluminum. Nonetheless, unresolved disputes persist, such as the WTO’s arbitration decision that denied the EU the right to impose tariffs related to NASA and Department of Defense research subsidies, illustrating the complex and multifaceted nature of transatlantic trade relations.
Potential Economic and Trade Impacts
The imposition of US tariffs, particularly on steel, aluminum, and various Chinese goods, has generated significant economic repercussions both within the United States and across its key trading partners, including the European Union (EU). A January 2022 study by the US Department of Agriculture estimated that retaliatory tariffs resulted in direct export losses totaling $27 billion from 2018 through the end of 2019. Additionally, a May 2023 report by the United States International Trade Commission found near-complete pass-through of these tariffs to US domestic prices, which led to a $2.8 billion increase in production within industries protected by steel and aluminum tariffs but was offset by a $3.4 billion production decrease in downstream sectors burdened by higher input costs.
The increased cost of domestic steel and aluminum also adversely affected employment in US manufacturing industries reliant on these metals, as higher input costs reduced manufacturing jobs and raised production expenses for metal-based goods. According to a January 2024 International Monetary Fund paper, unexpected tariff shocks tend to reduce imports more than exports, causing slight decreases in the trade deficit but persistent losses in gross domestic product (GDP). For instance, the IMF study estimates that reversing the 2018–2019 tariffs could increase US output by 4 percent over three years.
From the EU’s perspective, the US tariffs pose both direct and indirect economic threats. The EU is the US’s second largest partner for goods exports and imports as of 2022 and its largest for services trade in 2023, with a €
Procedural and Implementation Details
The European Commission is in the final stages of preparing its proposal for adopting countermeasures in response to US tariffs. This process involves the comitology procedure, whereby the Commission will consult a committee composed of representatives from EU Member States to finalize the legal act imposing additional countermeasures. The Commission aims to complete this process and adopt the legal act by mid-April.
Following several weeks of consultations involving member states, the EU Commission, and industry stakeholders, retaliatory measures against US tariffs on EU steel and aluminium were formally adopted. These consultations were essential to align member states and gather industry input on the impact and scope of potential measures. The European Commission has also opened consultations accessible via the EU Survey, governed by Regulation (EU) No 654/2014, to gather further input on affected products and commercial policy responses.
Although the EU proposed a reciprocal 20% tariff rate on US goods, this has been paused, with the US currently applying a 10% baseline tariff rate on EU imports since April 5. This pause was clarified by White House officials as the EU’s retaliatory tariffs had not yet gone into effect at that time. The EU’s procedural approach involves first laying out the contours of its response, consulting member states, and subsequently voting on whether to proceed with the measures.
EU policymakers have emphasized that all options remain on the table, including the use of the so-called EU “bazooka,” a trade weapon aimed at targeting American service companies, such as major tech firms like Google. This indicates a willingness to escalate retaliatory actions depending on how the situation evolves.
In addition to tariffs, the EU is prepared to activate its Anti-Coercion Instrument, a framework designed to escalate the EU’s response to external economic pressure, thereby enabling proportionate retaliatory measures against most US imports. Furthermore, cooperation with other countries negatively impacted by the US tariffs is being considered, including the possibility of initiating joint dispute-settlement cases at the World Trade Organization (WTO). This approach would allow coordinated retaliation should the US appeal any WTO condemnation of its measures.
Related and Ongoing Developments
The European Union’s response to the recent US tariffs is part of a broader and complex trade dispute marked by a series of retaliatory measures and ongoing negotiations. The EU’s actions come in the context of multiple US trade policies, including tariffs imposed under Section 232 of the Trade Expansion Act of 1962, Section 301 concerning China’s trade practices, and several executive orders addressing issues such as the synthetic opioid supply chain and illicit drug flows across borders.
Following the US imposition of tariffs on steel and aluminum imports, valued at approximately €26 billion annually, the European Union retaliated with tariffs on US goods worth around €21 billion, targeting products like soybeans, copper, and motorcycles. These measures were introduced gradually between April and December 2025 to allow space for negotiations. The EU has characterized the US tariffs as violations of fundamental World Trade Organization (WTO) rules and announced intentions to challenge the US policies at the WTO, particularly regarding duties on cars and car parts.
Previous episodes of tariff escalation between the EU and the US have seen similar patterns of reciprocal tariffs. For instance, additional EU measures were enacted in response to a second set of US tariffs imposed in 2020, affecting exports valued up to €3.6 billion. These rebalancing measures reflect a sustained effort by the EU to defend its trade interests while seeking to avoid a full-scale trade war.
Negotiations remain a critical element of the ongoing developments. The European Commission has called for trade talks focused strictly on the removal of tariffs on industrial goods, excluding agricultural products, alongside agreements on conformity assessment to reduce non-tariff barriers. The US Trade Representative similarly outlined negotiating objectives in early 2019, highlighting a mutual, though challenging, willingness to engage in dialogue.
The situation continues to evolve amid a volatile geopolitical environment. Companies are encouraged to develop flexible response plans capable of adapting to multiple scenarios, maintaining trade compliance, and mitigating the impact of tariffs on costs and supply chains. The EU’s ultimate response may involve a combination of tariffs and alternative measures, contingent on the final scope of US actions and broader geopolitical factors such as the ongoing situation in Ukraine.
Amid these tensions, debates persist within the EU regarding the best strategic approach. Some argue against retaliation, favoring negotiation and monetary policy to contain the impact of tariffs, while others advocate for a firmer stance involving targeted tariffs on US imports mirroring previous measures from the Trump administration.
The content is provided by Jordan Fields, Front Signals
