Amid the global scare on the likely impact of President Donald Trump’s reciprocal tariff, to be unveiled on Wednesday, the European Union said it will use a broad range of options to retaliate against the US move, triggering the possibilities of an impending tariff war.
“We do not necessarily want to retaliate,” European Commission President Ursula von der Leyen was quoted by Bloomberg on Tuesday, hours before the likely announcement of reciprocal tariff by Trump, which has cast a shadow on the global economy.
“If necessary we have a strong plan to retaliate and will use it,” she added, in one of the strongest statements against the US, a traditional US ally.
The Trump administration put in place tariffs on imported steel and aluminium last month and higher duties on cars will take effect on Thursday. The sweeping tariffs that are likely to be rolled out on Wednesday, according to Trump, will rectify tariffs as well as non-tariff barriers that he says are unfair, such as domestic regulations and how countries collect taxes, including the EU’s value-added tax.
The EU has, however, maintained that VAT is a fair, non-discriminatory tax that applies equally to domestic and imported goods.
Von der Leyen said she understood the US argument that others had taken advantage of global trade rules, adding that the EU had also suffered. She also said she understood the US wanted to re-industrialise, as does the bloc. However, the US tariffs, she said, were taxes on its consumers that would fuel inflation and make American factories pay more for components, costing jobs.
“Our objective is a negotiated solution. But of course, if need be, we will protect our interests, our people, and our companies,” Von der Leyen said in a speech to the European Parliament in Strasbourg.
According to the Bloomberg report, France and other countries have called on trade officials to consider deploying the bloc’s anti-coercion instrument, a tool designed to strike back against nations that use trade and economic measures coercively.
In a veiled threat, Von der Leyen mentioned that Europe’s strength lies not only in trade but also in technology, hitting at the relevance of the European business for large US tech firms that the EU could target as part of the retaliatory measures, the report added. The commission could use various legal instruments to restrict access to government contracts or digital advertising sales in a market worth around Euro 100 billion ($108 billion), she added.
“Europe holds a lot of cards,” Von der Leyen said. “From trade to technology to the size of our market. But this strength is also built on our readiness to take firm countermeasures. All instruments are on the table.”
The European Commission President told the lawmakers that the International Monetary Fund had estimated that Europe’s internal market barriers were equivalent to a 45 per cent tariff for manufacturing and 110 per cent for services before adding that the Commission would come up with proposals next month to remove some barriers and prevent new ones, reported Reuters.
Amid the tariff-induced uncertainties, the EU trade ministers are likely to meet on April 7 in Luxembourg to begin discussing how to react to Trump’s tariff package and work out a roadmap to begin discussions with the US for possible concessions from the sweeping tariffs.