EU Chief: EU to counter new US tariffs

The European Commission's Ursula von der Leyen said that Donald Trump's tariffs on all goods and services were a serious blow to the global economy. She also stated that the European Union would be prepared to take countermeasures in the event of a failure to reach an agreement with Washington.

Von der Leyen stated that the EU had already finalised a first set of tariffs for mid-April on goods worth up to 28.4 billion dollars ($26 billion) from the United States in response to U.S. tariffs on steel and aluminum which took effect March 12.

"We're preparing further countermeasures in case negotiations fail to protect our business and interests," von der Leyen stated in a statement that she read in Samarkand, Uzbekistan on Thursday ahead of a partnership summit between the EU and Central Asia.

Trump announced a minimum 10% tariff on the majority of goods imported into the United States on Wednesday, while the European Union will be charged a 20% rate.

Von der Leyen didn't provide any details about future EU measures.

The French government's spokesperson announced that additional measures covering a wider range of goods will be implemented at the end April. She added that nothing has been decided yet, but digital services and services in general are likely to take center stage.

Giorgia Mello, the Italian prime minister, said that the EU was working to reach a deal with America in order to avoid a possible trade war. She did not exclude a "adequate response" from Europe.

When the EU's trade ministers meet on Monday in Luxembourg, they will likely discuss this response.

In the war of tariffs, Brussels is less affected than Washington. U.S. imports of goods into the EU will total 334 billion euro ($365.6 billion), while EU exports of goods to the United States will be 532 billion euro in 2024.

The EU is also reluctant to target U.S. exports of oil and gas, which account for nearly 25% of U.S. imports.

What is targeted retaliation?

Ignacio Garcia Bercero is a fellow at the think tank Bruegel, and former EU chief negotiator of a planned EU/U.S. Trade Deal. He said that the EU needs to take more intelligent, targeted retaliation in order to maximize the political impact on the United States.

He said that the EU could use broader countermeasures, which would limit U.S. firms' access to EU tenders for public procurement or to EU service markets in financials and tech.

Garcia Bercero, a lawyer at Garcia Bercero, said that the inclusion of EU taxation in "reciprocal tariffs" by Trump's administration could be construed as coercion.

Washington claimed that the EU's tariff was effective at 39%. Trump criticized EU public health regulations and value-added taxes, which exclude U.S. chicken from its market. The EU claims that VAT is not a tax and is similar to U.S. sales taxes.

According to the World Trade Organization, the EU average tariff rate is 5%. The Commission states that the average tariff for goods traded between EU and US is 1% on both sides.

The EU duty rate of 10% on cars is higher than the U.S. 2.5% duty, but the United States charges 25% duty on imports of pick-up trucks – the largest segment in the U.S. automobile market.

According to the European Central Bank, a U.S. import tariff of 25 percent would reduce euro zone growth in the first 12 months by 0.3 percentage point. Counter-tariffs by the EU on the U.S. could raise this figure to a half percentage point.

According to a report released by Frontier Economics in February, a blanket 20% tariff on EU goods would cost the EU $209 billion. Services exports were expected to increase slightly.

On Thursday, the EU will face 25% U.S. duties on steel and aluminum, and within a month on auto parts.

On Thursday, French President Emmanuel Macron will meet with representatives of the business sectors affected by the new tariffs that come into effect on Saturday.

Von der Leyen expressed her regret for the U.S. decision and warned that it would have "immense" consequences on the global economy.

She agreed with Trump, that other countries had unfairly taken advantage of the global trade rules. She was willing to support reforms.

She said, "It's not too late for us to resolve our concerns through negotiation." ($1 = 0.9137 euros)

(source: Reuters)