Reuters
Washington’s tariff pause hasn’t stopped Brussels: The EU has launched its first countermeasures and is preparing more. How much leverage is left?
It would be interesting to know how much the U.S. president himself has lost as a result of his own actions. Elon Musk is said to be $10 billion poorer; estimates for Donald Trump vary, but some say about half a billion — though that’s far from certain. One thing’s for sure: his red «Make America Great Again» cap will cost 30 percent more because it’s made in China, and the trade war with Beijing is already in full swing.
Curiously, during the colossal stock market rout, Trump wrote on his social network that now was the perfect time to buy stocks: «Stay cool — everything will be fine». A few hours later, he announced a 90-day delay in his decision. Global markets immediately shot up. No one doubts that he and his allies «recovered» their losses and even came out ahead.
Back to the tariffs, which still need to be prepared, kept «in the fridge» and ready to go. It’s not entirely clear what else Washington can come up with.
The Europeans have decided to fight in stages. First, the European Commission unveiled counter-tariffs on tobacco, steel, textiles, poultry, corn, rice, and other goods — everything from dental floss and car mirrors to yachts and diamonds. At 2024 prices, the list covers €21 billion worth of goods. Overall, the EU exports €321 billion worth of goods across the Atlantic. At the insistence of France, Italy, and Ireland, American bourbon was removed from the list because Trump threatened a 200 percent tariff on wine, champagne, and spirits in retaliation.
After Trump postponed his tariffs, Ursula von der Leyen urged her colleagues to show restraint and work out a proportionate response. She called China’s prime minister to ask him not to act rashly, but since Trump’s delay doesn’t apply to Beijing, the Chinese confirmed they would press on to the end.
«Right now, the EU has to create the conditions for negotiations», says Trade Commissioner Maroš Šefčovič. «For weeks we have been working with all member states on countermeasures, and we have been thinking for a long time about what levers we have».
In short, the EU now has to walk a tightrope. Talking to Trump is never easy — least of all in his second term. Before unveiling his counter-tariffs, von der Leyen offered to exempt industrial goods — notably cars — from U.S. tariffs, but the president refused. Brussels has therefore mapped out its next steps. They will almost certainly be tweaked, but, as the saying goes, it will have to show its teeth.
Under WTO rules, the new measures should take effect in stages: April 15 and May 15 for most products, and December 1 for soybeans and almonds. Now the Commission has taken a time-out: on the one hand, it has to respond in roughly equal measure; on the other, officials want to «watch America cripple itself», as they put it. European analysts also want to avoid a tit-for-tat escalation, and are betting on talks and a possible future deal with the US.
Some member states insist that no concessions should be made to Trump. Emmanuel Macron, for example, urged French industry to stop investing in America, but few — especially the biggest companies — listened. Others, like Italy, think envoys should rush to the White House and negotiate, but a line of seventy-odd countries is already forming there.
Specifically on US goods, the Commission sees no need to match Washington’s tariffs one-to-one if Trump backtracks. Instead, it would likely target around 50 percent of the value, wary that heavier measures could backfire on the EU economy.
This does not mean that Brussels will shelve its plans. Whatever happens, the White House needs to know what the EU has prepared.
As a possible next round, the Union is considering tariffs on services — an area where the U.S. runs a trade surplus. Finance and the entire digital spectrum would be first in line. One proposal already on the table would tax American social media platforms, cloud storage providers, and even Hollywood movies.
Among the EU’s self-defense tools — never used before — is the Anti-Coercion Instrument, known in Brussels jargon as the «bazooka». Despite the clunky nickname, its mechanism is simple: U.S. companies could simply be denied access to the European market — on a case-by-case basis, not via a broad list.
For example, France’s national railway company SNCF stores its data in the Amazon cloud; under the bazooka, that lucrative contract could disappear. Licenses could be withdrawn from major American banks, intellectual property copyrights revoked, investment giant BlackRock frozen out, Tesla boycotted — the possibilities are endless.
But such an escalation could easily lead to endless rounds of «reaction to reaction to reaction» in which everyone suffers.
«Any countermeasures identical to those already imposed will deepen the trade stalemate and take us back to 1930», warns the French Confederation of Industry and Employers. «We have to tread carefully — whether it’s tariffs on goods, digital services, intellectual property or financial flows. Countermeasures must be finely balanced or they will damage our own productivity and competitiveness».
They are referring to the spring of 1929, when the U.S. economy seemed to have recovered from the stock market crash and was even booming in some areas: industry was largely on the upswing, but agriculture was lagging. Farm lobbies whispered to the newly elected Herbert Hoover that foreign competition was to blame and that import tariffs would help.
Congress decided to slap tariffs not only on farm goods but on everything it could reach, passing the Smoot-Hawley Act, which imposed 40 percent tariffs on nearly 20,000 imports. America got reciprocal measures. By 1930, the first aftershocks were felt, and the tariff war dragged on until World War II. Farmers, by the way, gained nothing.
Another option Brussels is considering is to rein in the big digital platforms by imposing caps and ceilings so onerous that it becomes unprofitable to operate in Europe — fines could reach 10 percent of a company’s global turnover. That would hurt badly.
The platforms — whether retail, entertainment or otherwise — could also lose access to data on 450 million Europeans, and their entire business model depends on that information. France, Germany and Austria now support this hard line.
Notably, Big Tech actively supported Trump’s election bid — both financially and morally. The «Magnificent Seven» (Apple, Amazon, Google and the rest) lost $1 trillion in market value during the recent tariff-induced market chaos — about a third of their combined capitalization. They probably knew the announcement was coming and did not panic.
The same fate befell Trump’s other big donors, the oil majors. The candidate had promised them a «new golden age», but everyone from Occidental Petroleum to Halliburton lost 15–20 percent of their stock prices — on top of the falling oil price. And oil is the litmus test of the global economy.