European Union readies €100 bn no-deal plan to match US 30% tariff

Business Standard

4 days ago

The European Union plans to quickly hit the US with 30 per cent tariffs on some €100 billion ($117 billion) worth of goods in the event of no deal and if US President Donald Trump carries through with his threat to impose that rate on most of the bloc's exports after Aug. 1.
As a part of a first wave of countermeasures, the EU would combine an already approved list of tariffs on €21 billion of US goods and a previously proposed list on an additional €72 billion of American products into one package, a European Commission spokesman said on Wednesday.
The US exports, which include industrial goods such as Boeing Co. aircraft, US-made cars and bourbon whiskey, would face a levy that matches Trump's 30 per cent threat, according to people familiar with the matter.
The threatened retaliation from Brussels would hit about one-third of American exports to the EU, based on the €335 billion worth of US goods shipped to the bloc last year.
The tariffs would be prepared to come into force next month but only if there is no deal and the US implements its levies after the August deadline, said the people who spoke on condition of anonymity to discuss private deliberations.
The euro extended a fall after the report, down 0.3 per cent at $1.1723, leading losses among major currencies. German bonds trimmed an earlier decline. The plans come as EU member states, including Germany, have hardened their positions in response to the US stiffening its negotiating stance.
Berlin would be willing to even support the activation of the EU's anti-coercion instrument, or ACI, in a no-deal scenario, a government official said on condition of anonymity. This tool would come into play only if a deal fails to materialise.
Trump announced two tariff deals on Tuesday — one with the Philippines and another with Japan, and both featured across-the-board duties on their imports that were lower than initially threatened. Also noteworthy was the 15 per cent US levy on Japanese autos that was lower than the current 25 per cent rate on major car exporters including the EU.
European leaders are in Tokyo and Beijing this week for talks with some of the the bloc's biggest trading partners in Asia.
US Treasury Secretary Scott Bessent, speaking with Bloomberg Television on Wednesday, said the EU hasn't yet brought anything as innovative as the Japanese offer. 'Talks are going better than they had been,' he said in the interview. 'I think that we are making good progress with the EU, but as I've said before, the EU has a collective action problem with 27 countries.'
The EU's most potent trade tool is the ACI, and a growing number of member states is pushing for its use if a deal isn't reached. The instrument is primarily designed as a deterrent and is currently not on the table, with its activation requiring a qualified majority of member states to support the move. The ACI would enable the EU to launch a broad range of retaliatory actions, including new taxes on US tech giants, targeted curbs on US investments, and limiting access to the EU market.
'We are now approaching the decisive phase in the tariff dispute with the USA — we need a fair, reliable agreement with low tariffs,' German Chancellor Friedrich Merz told reporters in Berlin on Tuesday after a meeting with his Czech counterpart Petr Fiala. 'Without such an agreement, we risk economic uncertainty at a time when we actually need exactly the opposite.'
The Commission, the EU's executive arm, is discussing the instrument with member states, the people said. While some capitals having been pushing to use the tool, most want to wait to see how the situation develops beyond Aug. 1 before progressing discussions further to try to achieve the required majority, they added.
The overwhelming preference is to keep negotiations with Washington on track in a bid for an outcome to the impasse ahead of next month's deadline. EU and US negotiators are scheduled to continue talks on Wednesday.
The US is now seen to want a near-universal tariff on EU goods higher than 10 per cent, with increasingly fewer exemptions limited to aviation, some medical devices and generic medicines, several spirits, and a specific set of manufacturing equipment that the US needs, Bloomberg previously reported.
The two sides have also discussed a potential ceiling for some sectors, as well as quotas for steel and aluminum and a way to ring-fence supply chains from sources that oversupply the metals. Any agreement would need Trump's sign off – and his position isn't clear.
The US president wrote to the EU earlier in the month, warning of a 30 per cent tariff on most of its exports from Aug. 1. Alongside a universal levy, Trump has hit cars and auto parts with a 25 per cent customs tax, and steel and aluminum with double that. He's also threatened to target pharmaceuticals and semiconductors with new duties as early as next month, and recently announced a 50 per cent duty on copper.
Hoped-for extension
Before Trump's letter, the EU had been hopeful it was edging toward an initial framework that would allow detailed discussions to continue on the basis of a universal rate of 10 per cent on many of the bloc's exports.
While most capitals and officials accept that any agreement would be asymmetrical in favor of the US and see the EU facing higher than 10 per cent rates, the bloc has been seeking wider exemptions than the US is offering, as well as looking to shield the bloc from future sectoral tariffs.
The EU's €100 billion list would cover its response to Trump's universal duties as well as his tariffs on metals and cars.
The level of pain that member states are prepared to accept varies, and some are open to landing on a higher 15 per cent levy if enough exemptions are secured and the scope of the duty was clear, the people said.
In addition to the tariffs on goods, the bloc's executive arm is also working on measures that could see export controls as well as restrictions on some services and public procurement contracts introduced in future, they said.