European Union flags flutter.
Credit: Reuters Photo
The EU is ready to retaliate to safeguard its interests if the U.S. proceeds with imposing a threatened 30 per cent tariff on European goods starting on August 1, European Commission President Ursula von der Leyen said on Saturday.
However, von der Leyen, head of the EU executive which handles trade policy for the 27 member countries of the EU, said it was also ready to keep working towards an agreement by August 1.
"Few economies in the world match the European Union's level of openness and adherence to fair trading practices," she said in response to new threats by US President Donald Trump on Saturday escalating a trade war Europe had hoped to avoid.
"We will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required," she said of possible retaliatory tariffs on US goods entering Europe.
European capitals swiftly backed that position.
"As part of European unity, it is more than ever up to the Commission to assert the Union's determination to defend European interests resolutely," French President Emmanuel Macron said on X.
German Economy Minister Katherina Reiche urged a statement for a "pragmatic outcome to the negotiations".
"The tariffs would hit European exporting companies hard. At the same time, they would also have a strong impact on the economy and consumers on the other side of the Atlantic," she said.
Spain's Economy Ministry backed further negotiations but added that Spain and others in the EU were ready to take "proportionate countermeasures if necessary".
Trump has periodically railed against the European Union, saying in February it was "formed to screw the United States" and asking why Europe exports so many cars but buys so few US cars in return.
His biggest grievance is the U.S. merchandise trade deficit with the EU, which in 2024 amounted to $235 billion, according to U.S. Census Bureau data. The EU has repeatedly pointed to the US surplus in services, arguing it in part redresses the balance.
Combining goods, services and investment, the EU and the United States are each other's largest trading partners by far. The American Chamber of Commerce to the EU said in March the trade dispute could jeopardise $9.5 trillion of business in the world's most important commercial relationship.
"Europe must not allow itself to be intimidated by this, but must soberly seek a solution at the negotiating table on equal terms," said Dirk Jandura, president of the German exporters association BGA, adding the latest threats were a "well-rehearsed" part of his negotiating strategy.
Carsten Brzeski, global head of macro at ING, said Trump's move suggested that months of negotiations remained deadlocked and that things were inching towards a make-or-break moment for the transatlantic trade relationship.
"The EU will now have to decide whether to budge or to play hardball," he said. "Its hard to draw real conclusions right now other than this will bring market volatility and even more uncertainty."
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted that the brunt of the U.S. tariffs, if implemented, would be felt by U.S. consumers.
"The EU should take a hard line in negotiations, because model calculations show that tariffs against the EU have a stronger negative effect in the US than in the eurozone."
That said, there would also be clear repercussions for the euro area economy, already struggling with weak growth.
The European Central Bank had used a 10 per cent tariff on EU exports to the United States as the baseline in its latest economic projections, which put output growth in the euro area at 0.9 per cent this year and 1.1% the next and 1.3 per cent in 2027.
It said a 20 per cent U.S. tariff would curb growth by 1 percentage point over the same period and also pull down inflation to 1.8% in 2027, from 2.0% in the baseline scenario. It did not even offer an estimate for the possibility of a 30% tariff.