European Commission Announces Proportional Response to U.S. Tariffs

AUTHOR: M.J. GDNUS

The European Commission will introduce countermeasures next week in response to U.S. tariffs on aluminum and steel imports, while the response to tariffs on automobiles and reciprocal 20% tariffs on a wide range of products will follow after analysis and consultations with member states.

Since March 12, a decision imposing 25% tariffs on aluminum and steel imports from around the world into the United States has been in effect, and from April 3, a 25% tariff has also been applied to all cars and car parts not manufactured in the U.S.

At Least 10% Tariff on All

On April 2, U.S. President Donald Trump declared a global trade war and announced reciprocal tariffs, with at least a 10% tariff on all goods, and even higher tariffs on about 60 countries, which will come into effect on Wednesday, April 9. The European Union has been assigned a 20% tariff, while China faces a 34% tariff.

It remains unclear whether the announced tariffs will be permanent or part of a tactic to gain concessions. Trump stated that tariffs would give him “great power in negotiations.”

By the middle of last week, the Commission consulted with member states regarding countermeasures against U.S. tariffs on steel and aluminum, and a decision is expected to be made on Wednesday, with measures coming into effect on April 15.

The decision will be made based on the Commission's proposal within the committee procedure, meaning the Commission can make a decision unless a qualified majority (55% of member states representing at least 65% of the EU’s population) opposes it. If there is no qualified majority for or against the proposal, the Commission can decide on its own.

“Proportional Response Up to €26 Billion”

The Commission announced a proportional response up to €26 billion, corresponding to the economic scale of U.S. tariffs.

Regarding countermeasures to U.S. tariffs on automobiles and auto parts, as well as the reciprocal 20% tariffs, the Commission emphasized that it will not rush and will carefully analyze all details.

The Commission's approach is based on three elements: negotiations, countermeasures, and trade diversification. It aims to find a solution through negotiations for unjust and harmful tariffs, with the strength of its internal market as a major advantage. If negotiations fail, countermeasures will follow.

“After the U.S. administration's decision to impose comprehensive tariffs on goods from the European Union, the EU will respond calmly, carefully, gradually, and most importantly, united, as we calibrate our response. We will not strike first; we want to give negotiations every chance to succeed in finding a fair agreement for both sides,” said Trade Commissioner Maroš Šefčovič.

“Everything Is on the Table”

The Commission does not want to disclose what measures it may take and emphasizes that “everything is on the table.”

“All options are on the table, and we do not want to speculate on what we will do,” said a senior Commission official who wished to remain anonymous. The goal is to ensure that potential countermeasures are as painful as possible for the United States while causing minimal damage to Europe, i.e., tariffs will be applied to U.S. products for which there is an alternative.

“We will not impose tariffs on products we do not produce, while the Americans have imposed tariffs on items like coffee or bananas, which they do not produce,” said the unnamed Commission official. He added that Europeans have alternatives, for example, for Harley-Davidson motorcycles, Levi’s jeans, or soybeans.

According to initial estimates by the Commission, reciprocal 20% tariffs would affect approximately €290 billion worth of European exports to the U.S., which would generate €58 billion in revenue for the U.S.

For automobiles and auto parts exported by the EU, worth around €66 billion, a 25% tariff would generate €16.5 billion, while for aluminum and steel exports worth €26 billion, tariff revenue would amount to €6.5 billion.

Member States Cannot Negotiate Directly with Trump’s Administration

Overall, additional U.S. tariffs affect goods worth approximately €380 billion, or about 70% of total EU exports to the U.S. This would result in €81 billion in tariff revenue for the U.S. annually, up from the current €7 billion. However, this €80 billion could only be achieved if trade volumes remain the same, which is unlikely as trade volumes usually decrease with tariff barriers.

The Commission has exclusive authority in external trade, and member states cannot negotiate directly with Trump’s administration. It is important to ensure that the burden of countermeasures is distributed evenly among member states, as not all member states depend equally on trade with the U.S. market. Ireland, Germany, and Italy are the most exposed.

Therefore, the EU’s unity will be tested when deciding on which measures and which products to target with tariffs, as some member states may ask for certain U.S. products to be removed from the list to avoid retaliation on their export goods.

There is speculation, for example, that France is asking for U.S. bourbon to be removed from the tariff list because Trump has threatened 200% tariffs on French wines.

Taxing Digital Services

The Commission is aware that in negotiations with the United States, it must be in a strong position, so it emphasizes that everything is on the table and no countermeasures are ruled out. This could include taxing digital services provided by American tech companies like Apple, Amazon, Meta, or financial services (PayPal).

The Commission also holds a powerful tool, sometimes called the “nuclear option.” This is the instrument to fight coercion, which allows the EU to retaliate against countries that use economic pressure and trade to influence EU decisions. The instrument for combating coercion (ACI) allows for a wide range of potential countermeasures if a country refuses to desist from using coercion.

These measures could include imposing tariffs, limiting trade in services and intellectual property rights, and restricting access to foreign direct investments and public procurement. This instrument has never been used before and was originally designed as a deterrent against Chinese pressures.