President Donald Trump is once again threatening the European Union with new duties—and European leaders are vowing to retaliate.
Following comments about imposing 10-percent duties on China and 25-percent tariffs on Mexico and Canada on Tuesday, Trump appeared to tap into a campaign refrain regarding a universal baseline tariff that could impact trading partners across the globe.
“The European Union is very, very bad to us,” he told reporters. “So they’re going to be in for tariffs. It’s the only way…you’re going to get fairness,” he added.
Trump’s ire stems from trade deficits with European countries, which he said export far more goods to the U.S. than they take in. According to data from the European Commission, EU countries exported about $522 billion worth of products to the U.S. in 2023, but imported only about $354 billion in American goods.
The president did not specify the scope or percentage of the duties he plans to implement, or when they might take effect.
EU economy commissioner Valdis Dombrovskis told CNBC on the sidelines of the World Economic Forum in Davos, Switzerland on Tuesday that the trade bloc is prepared to respond in kind if tariffs are imposed.
“If there is a need to defend our economic interests, we will be responding in a proportionate way,” he said. “We’re ready to defend our values and also our interests and rights if that becomes necessary.”
Dombrovskis said EU officials have been working with American counterparts to drum up a solution that would allow for a diffusion of trade tensions. He said economies across the world could face consequences due to a falling out between the U.S. and Europe.
“It’s important to maintain this trade and investment relationship because global economic fragmentation would set in, and there is a real risk of this happening, and the IMF estimates that it would mean a reduction of the world GDP by up to 7 percent,” he said.
While she didn’t call out the president’s threat explicitly, EU Commission President Ursula von der Leyen on Tuesday seemed to call for a measured approach to future trade negotiations.
“Exchanges between [the U.S. and the EU] account for 30 percent of global trade. A lot is at stake for both sides,” she tweeted from Davos. “Our priority will be to engage early, discuss common interests, and be ready to negotiate. We will be pragmatic, but we will always stand by our principles and values. It is the European way.”
While Trump’s bombastic rhetoric continues to stir the pot with world leaders, critics and supporters alike noted that he has refrained from taking any concrete steps to impose duties or trade sanctions during his first week in office as he promised on the campaign trail.
Instead, one of Trump’s first executive orders called for the Departments of State, Treasury, Defense, Commerce, Homeland Security, the Office of the U.S. Trade Representative and other government agencies to assess the country’s current trade policies and relationships to inform a forward-looking strategy. The reporting is due on April 1.
“The President’s executive order on trade establishes a thoughtful approach to a new trade agenda, laying out a tight timeline for studies and recommendations for action,” Josh Teitelbaum, senior counsel for international trade policy at Washington, D.C. law firm Akin-Gump, told Sourcing Journal.
“The President himself, on the other hand, has been more eager to threaten tariffs on Mexico, Canada, and China,” he added. “These threats—whether to stem the flow of migrants or fentanyl—seem intended to achieve some non-trade goal and therefore may be more temporary than tariffs intended to address unfair trade practices or persistent trade deficits,” like the ones he’s proposed for EU countries.
“Either way, it’s still clear that the President wants higher tariffs and we know who his top targets are, even if the justifications evolve,” Teitelbaum opined. “Immigration, fentanyl, the dollar as a reserve currency, even the dispute between Russia and Ukraine—Trump has threatened tariffs to create leverage for all of them.”
The lawyer said he believes Trump “increasingly sees tariffs as a tool to address issues outside of trade,” calling duties “his Swiss army knife of policy tools, the one he thinks he can take out of the toolbox to take on any problem.”