Gauging the EU's Response to Potential U.S. Tariffs

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The U.S. and EU flags are seen next to each other.

In the likely case that the United States imposes higher tariffs on the European Union, the bloc will impose retaliatory tariffs on U.S. goods while simultaneously pursuing a negotiation with Washington, but this may not be enough to prevent a lengthy trade war. U.S. President Donald Trump's Feb. 1 threat to impose higher tariffs against the European Union has generated calls for both retaliation and dialogue in Europe. On Feb. 2, a spokesperson from the European Commission said that ''the European Union would respond firmly to any trading partner that unfairly or arbitrarily imposes tariffs on EU goods.'' On Feb. 3, French President Emmanuel Macron said ''If we are attacked in terms of trade, Europe — as a true power — will have to stand up for itself and therefore react,'' while Danish Prime Minister Mette Frederiksen called for ''a collective and robust response'' against the United States. Other EU leaders showed a more conciliatory tone. On Feb. 3, German chancellor Olaf Scholz called for more ''cooperation'' between the European Union and the United States to address their trade disputes, while Polish Prime Minister Donald Tusk said that the European Union ''has to do everything it can to avoid these totally unnecessary and stupid tariff wars or trade wars.''

The United States is the top destination for EU goods, representing roughly 20% of the bloc's total exports. For years, the European Union has had a trade surplus in goods with the United States; in 2023, the latest data available, EU exports to the United States reached 502.3 billion euros, or $518.2 billion, while EU imports from the United States reached 346.5 billion euros, or $357.5 billion. The European Union also has a trade surplus with the United States in services.
Since retaking office on Jan. 20, Trump has criticized the European Union's trade surplus with the United States, just as he did during his first term (2017-2021) and the 2024 presidential campaign. On Feb. 2, he called the surplus an ''atrocity'' and said his threatened tariffs against the bloc would ''definitely happen.''
On Feb. 2, Trump also suggested that the United Kingdom may not be targeted with tariffs, arguing that the country's trade relationship with the United States could ''be worked out.'' This is because the United States and the United Kingdom have a more balanced trade relationship, with most of the trade happening in services and the United Kingdom reporting only a small trade surplus with the United States in goods.

If the United States imposes tariffs on EU goods, the European Union will target select U.S. products with tariffs of its own and seek a compromise with the White House before adopting more extreme measures. Should the White House implement tariffs on EU goods, the bloc will almost certainly retaliate with its own tariffs. For months, EU officials have said that Brussels already has a list of U.S. products that it would target in the case of a trade war with the United States. While the list has not been revealed, these tariffs would likely target politically and economically sensitive U.S. industries, including the manufacturing and agricultural sectors. For example, when the first Trump administration imposed tariffs on EU steel and aluminum in 2018, Brussels retaliated with tariffs on U.S. bourbon, motorcycles and agricultural products, including peanut butter, orange juice and soybeans — all of which are heavily produced in Republican-controlled states. At the same time, the European Union will also seek to reach a compromise with the White House to end the trade war, but should these negotiations fail to bear fruit, the European Union could resort to additional measures. In 2023, the bloc approved the Anti-Coercion Instrument, which allows Brussels to impose import restrictions on goods and services, public procurement and foreign direct investment, along with non-tariff barriers (such as stricter safety or environmental standards and labeling requirements) on third countries. Unlike the targeted tariffs, which Brussels can impose on its own, the measures under the Anti-Coercion Instrument require a qualified majority vote among the 27 EU member states. Because of this need for political agreement among EU members to use the Anti-Coercion Instrument, the bloc may only deploy these measures at a later stage in its trade dispute with the United States. Finally, the European Union will try to avoid escalatory measures, such as implementing fully reciprocal retaliatory measures (like a broader tariff hike to mirror those of the United States). This will be a last resort option that Brussels will only pursue if the United States triggers escalatory measures of its own.

If the United States imposes tariffs on EU goods, the European Union will also likely take the issue to the World Trade Organization's dispute settlement body. However, the settlement body is virtually paralyzed, which means this would not result in any fast or effective measures to end the bilateral dispute.
The European Union could also launch anti-subsidy investigations against the United States similar to the one it recently launched against China's electric vehicles. While this would be a WTO-compliant measure, anti-dumping investigations are data-driven and would require the European Union to find a legitimate dumping issue in the United States. Moreover, anti-subsidy investigations tend to take over a year, which means this would not provide Brussels with the quick response it will be looking for. Similarly, the European Union could modify some of its legislation to negatively impact U.S. companies (for example, it could enhance digital tax and data privacy regulations to make it harder for U.S. tech companies like Amazon, Apple or Google to operate in Europe). But this is also a very slow process that could take months or even years to implement, which makes this decision unlikely.

The European Union will also seek to make concessions to the United States on issues including energy and defense, but Brussels' options in this regard are limited and may not prevent a lengthy trade war. The European Union's ultimate goal is to avoid a lengthy trade war with the United States that will negatively impact economic growth in Europe. This means that while Brussels will likely impose retaliatory tariffs on the United States, it will also seek a compromise and be willing to make concessions to the White House to avoid escalation. The main challenge for Brussels is that many of the concessions it could make will require the active commitment of individual EU member states. In recent weeks, several EU officials have said that Brussels will offer to increase purchases of U.S. liquefied natural gas (LNG) to avoid a trade war. This would help the European Union appease the Trump administration while also helping the bloc to further reduce its reliance on Russian LNG. However, the European Union itself does not directly purchase LNG, which means that private companies and energy firms within individual EU member states would need to negotiate and sign contracts for LNG imports. As a result, Brussels will need to convince national governments to promote the purchases in their own territories. The European Union will also likely promise to increase purchases of U.S. weapons systems such as F-35 fighter jets and Patriot missile systems. This will be easier said than done, however, as some EU member states (notably France) are currently pushing for a ''buy European'' approach to defense spending that would exclude the United States. In addition, most defense spending decisions in the European Union are still made at the national level, which means that Brussels' promises to Washington in this regard will require the backing of individual governments. Separately, the European Union can also promise to increase its purchases of certain U.S. products, as it did during the first Trump administration when it offered to purchase additional U.S. soybeans in 2018 and additional U.S. beef in 2019. This could be particularly effective in those sectors where the European Union has import quotas (such as agricultural products, steel, textiles and seafood) because Brussels could allocate a greater proportion of the quota to the United States. However, this policy would be less effective for sectors not covered by quotas. This means that while the European Union will have options to appease the United States, they may not be enough to prevent a years-long trade war between the two economies.

The European Union could also promise to restart discussions on a limited U.S.-EU trade deal, focusing on reducing industrial tariffs and harmonizing regulations. However, free trade agreements take years and this promise alone may not be enough to avoid a trade war as the White House is unlikely to support such a deal.
Additionally, the European Union could make political promises to the United States on issues like relations with China. Brussels could pledge to align more closely with U.S. trade policies on Beijing by, for example, restricting the export of advanced semiconductors to China or increasing scrutiny on Chinese investments. While these promises may not necessarily materialize, they could help ease EU-U.S. tensions.