On Wednesday, March 12, the European Union launched countermeasures against the United States tariffs on metal imports, announcing its intention to enact its own levies on American goods worth up to 26 billion euros ($28.3 billion).
The mentioned statement from Brussels was made after the administration of US President Donald Trump imposed 25% duties on steel and aluminum imports as part of a new phase of the trade war. It is worth noting that in the context of the escalating economic confrontation between the United States and the European Union, there has been a significant deterioration in relations between the long-standing trading partners.
A senior European official who spoke with media representatives in a confidential manner said Brussels would target politically sensitive goods in Republican-led US regions, including soybeans from Louisiana, home to Speaker of the House of Representatives Mike Johnson.
It is worth mentioning that during the first presidential term of Donald Trump, the European Union imposed tariffs on metals. These trade policy measures were then suspended. Starting on April 1, the mentioned tariffs, which temporarily became the past, but are now returning to the space of current reality, will enter into force in full on April 1. It is worth noting that the relevant measures will also be expanded regarding its configuration, which was observed during Mr. Trump’s first presidential term. In this case, it implies the intention of the European Union to impose levies, which have never previously been in force.
Also, the mentioned association of countries immediately begins consultations with member states to adopt additional lists of agricultural and industrial products subject to tariffs reaching 25% by the middle of next month. The officials said that in this case, the idea is to open a window of opportunity for the negotiation process, which will involve the head of the trade bloc, Maros Sefcovic.
European Commission President Ursula von der Leyen told reporters at a briefing in Strasbourg that the countermeasures decided by the European Union were strong but proportionate. According to her, Europe firmly believes that in a world full of geo-economic and political uncertainty, it is not in the common interests of Brussels and Washington to burden their economies with tariffs similar to those that are coming into force.
It is worth noting that many, but still not all, of the countries affected by the mentioned measures have already responded to the tightening of the United States trade policy. For example, the United Kingdom has so far refrained from immediate action in the context of the reaction to the tariffs, which were decided by the administration of Donald Trump.
Against the background of news about countermeasures from the European Union, local stocks showed growth. The Stoxx Europe 600 increased by 0.7%. Germany’s DAX showed growth of 1.2%. The euro was little changed. The European currency has paused after a sharp rally in recent days.
For the European Union, the new levies will be almost four times higher than similar tariffs imposed by the United States during Donald Trump’s first term as president. At that time, Washington targeted the export of metals worth 6.4 billion euros from Europe. The United States explained these actions for reasons of national security. According to media reports, citing an official from the European Union, the value of levies that came into force during Donald Trump’s first presidential term currently stands at 4.5 billion euros, based on the present volume of trade between Brussels and Washington.
Europe will target US steel and aluminum products. The countermeasures will also affect textiles, agricultural goods, and home appliances.
Currently, the European Union’s plan is to penalize products worth 22.5 billion euros. This was reported by the media, referring to a European official. It was also separately noted that Brussels has the right to increase the mentioned amount so that this figure corresponds to the full value of tariffs from the United States of 26 billion euros. The European Union targets products that will inflict damage in politically sensitive places in the US. At the same time, European policymakers will strive to avoid additional economic problems for their region.
The European Union intends to hit beef and poultry from US regions such as Nebraska and Kansas. The relevant information was published by the media with reference to a European official. It is worth noting that the heads of the mentioned regions of the United States are Republicans.
A kind of tariff list of the European Union will include goods that were the subject of a previous trade confrontation between Brussels and Washington. In this case, it refers to products such as boats, bourbon, and motorbikes.
A European official who spoke to reporters said that Brussels may start sourcing some targeted goods outside the United States. In this context, soybeans from Brazil and Argentina were mentioned, among others.
It is worth noting that Donald Trump also announced the imposition of reciprocal tariffs early next month. According to him, Washington’s relevant measures will be based on the policies of the United States partners. In this case, it refers to the decisions of the mentioned partners, which are identified by the administration of Mr. Trump as obstacles to US trade. The specified category of decisions includes, among other things, the European value-added tax. Also, according to media reports, in this case, the administration of the President of the United States targets specific goods from the European Union, including cars.
Last month, Maros Sefcovic traveled to Washington. During this visit, an attempt was made to reach an amicable solution with senior members of Donald Trump’s team, including United States Commerce Secretary Howard Lutnick. It was proposed to reduce tariffs on industrial products, including automobiles, and increase US imports of liquefied natural gas and defense goods.
On Wednesday, Maros Sefcovic said that disruptions caused by tariffs could be avoided if the administration of the President of the United States accepts the European Union’s extended hand and works with Brussels to strike a deal. Also in this context, it was separately noted that Europe is ready for the negotiation process.
In the European steel market, manufacturers expect the double effects of trade tensions between the European Union and the United States. Exports to the US will decrease and at the same time, the region’s imports are set to rise as metal is re-routed away from the United States.
A spokesperson for industry lobby group Eurofer, in a media comment, said that in the context of the current situation, there are reasons to expect that the European Union market, which is already saturated with cheap steel imports from Asia, North Africa, and the Middle East, will be even more flooded, since steel destined for the US, redirected due to new tariffs. It was also noted that during the first presidential term of Donald Trump, out of every three tons of steel that were deflected from the United States market because of levies, two went to Europe.
Aluminum producers are also preparing for a sharp increase in imports, especially from Canada, which typically supplies more than half of the aluminum that the US imports.
Tariffs for metals apply worldwide. The consequences of these measures extend to both economic competitors and the United States’ closest allies. Major Asian manufacturers, including Japan, South Korea, Taiwan, and Australia, have so far refrained from retaliatory actions. The United Kingdom has indicated its intention to focus on rapid negotiations on a broader economic agreement.
For the European Union, the fight over US tariffs on metals began in 2018, during Donald Trump’s first term as president. At that time, Washington hit steel and aluminum exports with duties. These actions were carried out under the pretext of national security concerns. The European Union perceived the mentioned explanation of the tightening of trade policy measures by the United States as untenable. It was noted that Brussels is not a threat to US security. The European Union imposed retaliatory measures. Brussels has targeted politically sensitive companies, including Harley-Davidson and Levi Strauss & Co.
The United States and the European Union have agreed on a temporary trade truce in 2021. At that time, the US president was Joe Biden. The United States has partially lifted its measures and imposed several tariff quotas, over which levies on metals are applied. The European Union has frozen all its restrictive measures.
Donald Trump on Wednesday said the United States would respond to European countermeasures against his new 25% tariffs on steel and aluminum. Against the background of the relevant plans, the risk of a further escalation of the trade war is significantly increasing. In the long term, the corresponding process, when the most negative scenario materializes, can form something like a struggle for survival in the global economic space, in which each participant will be on his own. In the context of this state of affairs, the countries with the largest margin of safety will be the winners. From this point of view, the United States has positive prospects, but it is unlikely that it will be possible to avoid losses.
Donald Trump stated the intentions of retaliatory actions against European countermeasures, answering a corresponding question from journalists at the White House. Moreover, he said that the European Union was set up to take advantage of the United States.
Donald Trump did not specify which measures would be imposed on Brussels.
According to media reports, there is a possibility that negotiations on tariff mitigation may be held in the coming months. It is worth noting that in the context of commenting on Washington’s tightening trade policy, world capitals are making statements not only about their readiness for retaliatory decisions of a similar nature but also that a large-scale economic confrontation will have very negative consequences that should be avoided. For example, Brazil intends to initially hold talks with the administration of Donald Trump and only then consider possible retaliatory measures.
United States stock indexes rose after two days of heavy losses. Cooler-than-forecast inflation data for February became a positive dynamic factor. At the same time, concerns about the potential consequences of the Donald Trump administration’s policies, including in the area of the economy, continue. The prospect of a large-scale trade war is still relevant and shows no signs of abating as a likely scenario for the future.
Donald Trump’s swift efforts to rewire the United States economic system as a global manufacturing power have shaken financial markets, spooked consumers who are still facing the negative effects of coronavirus-era inflation and heightened fears of a recession in the US. Mounting uncertainty for corporate America is also currently being observed.
It is worth noting that representatives of the United States industry do not have a unified approach to assessing the tightening of Washington’s tariff policy both in the context of actions with short-term consequences and in terms of the strategic long-term outcome of this move. In a more specific sense, this means that there are those executives who support the trade measures of the Donald Trump administration, perceiving the relevant decisions as good for the US economy, and those who adhere to a pessimistic assessment of the prospects. For example, Alcoa, the largest aluminum producer in the United States, warned that the current configuration of Washington’s tariff policy puts tens of thousands of jobs at risk and at the same time raises prices for US residents who face a shrink of funds in their household budgets. At the same time, supporters of the Donald Trump administration’s trade measures argue that these decisions, consistent with the concept of protectionism, can increase the profits of homegrown producers and bring jobs back to the steel and aluminum industries from overseas.
Currently, Mr. Trump is, in a sense, building significant barriers around the economic system of the United States. The US president is convinced that these actions are necessary to restore balance in the global trading system, which, in his opinion, is ripping off the United States. At the same time, as noted by the media, he demonstrates indecision against some duties.
Concerns that the current configuration of Washington’s tariff policy could have a negative impact on the growth of the United States economy have already provoked three weeks of volatility in global markets.
Kok Hoong Wong, head of institutional equities sales trading at Maybank Securities in Singapore, said that traders and investors are really feeling the effects of rising tariffs.
Donald Trump’s advisers are currently crafting reciprocal tariffs on trading partners around the world, which could take effect as early as April 2. Mr. Trump pledged to impose levies on automobiles, semiconductors, pharmaceuticals, and agricultural products.
Those US manufacturers who do not support the Donald Trump administration’s tariffs on steel and aluminum note that subsidized foreign competitors, especially China, which produces more than it can consume at home, unfairly seek to dominate the industry by robing market share and jobs from American suppliers. Also, within the framework of this rhetoric, it is stated that the metallurgical industry is crucial for the industrial base and national security of the United States.
Scott Paul, president of the Alliance for American Manufacturing, said at the same time that strengthening tariffs on steel and aluminum would help incentivize companies to increase output, make new investments, and hire workers.
The nation’s largest steelmakers, including Nucor, United States Steel, Cleveland-Cliffs, and Steel Dynamics, last week urged Donald Trump to resist carveouts’ calls. In this context, it was noted that previous exemptions prompted a sharp increase in imports, which led to a drop in prices and shrinking profits for the mentioned companies.
Economists predict that the tariff policy measures of the Donald Trump administration are likely to cause grown costs for some US industries, which are heavily dependent on foreign supplies of specialty steel. This applies, among other things, to the oil industry, which uses steel pipes and other materials at wells. Also, economists cited by the media claim that higher prices for steel and aluminum can trickle down to consumers in the form of more expensive cars, home appliances, and even canned drinks.
Supporters of Donald Trump’s tariff plan are convinced that the appropriate measures will eventually help increase production in the United States. It is worth noting that Mr. Trump acknowledged the likelihood of some economic pain from his tariff onslaught in the short term, but this does not negate his confidence in the long-term benefits.
