EU weighs tariff retaliation against US

Editor's note: Liu Chunsheng, a special commentator on current affairs for CGTN, is an associate professor at the Beijing-based Central University of Finance and Economics. The article reflects the author's opinion and not necessarily the views of CGTN.

Initiation of EU's tariff retaliation

Recently, the European Union was said to be considering imposing additional tariffs on up to 93 billion euros ($109.6 billion) worth of US goods imported into the bloc, in response to US President Donald Trump's tariff threats against Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Great Britain — threats he linked to negotiations over Greenland, according to NBC News.

This tariff list, formulated last year but suspended due to concerns about trade conflicts, has resurfaced as an important signal of changes in the global economic and trade patterns. For a long time, the EU has maintained restraint in its economic and trade relations with the US, replacing confrontation with negotiation and balancing with exemptions, making it the most important "buffer zone" for US unilateralist policies. However, when this dusty tariff list is put back on the agenda, it means that the EU's institutional tolerance is on the verge of exhaustion, and the trade advantages that the US has maintained through the compromise of its allies are facing unprecedented backlash. This tariff game between the EU and the US is not only related to the economic and trade trends of the two major economies, but also reflects the profound changes in the global trade system under the impact of unilateralism.

The continuous escalation of US unilateralism is the fundamental inducement for the EU to put aside "alliance friendship" and settle the tariff accounts clearly. Last year, the new US government frequently waved the tariff stick, turning trade tools into chips for geopolitical games, ignoring the core interests of the EU as a traditional ally, and eroding the foundation of mutual economic and trade trust between the two sides step by step. From renewed tariffs on EU steel and aluminum to fresh threats targeting autos, chips and pharmaceuticals, the US protectionist moves have put pressure on key European industries.

More provocatively, the US has tied its tariff policy to territorial sovereignty, threatening to impose additional tariffs on goods exported to the US from eight European countries to force them to make concessions on the Greenland issue. This approach has completely broken through the bottom line of the EU's alliance relationship with the US. In fact, trade disputes between the US and the EU have a long history. As early as 2018, the US imposed tariffs on EU steel and aluminum products on the grounds of "national security". Although the Biden administration reached a tariff quota agreement to temporarily ease tensions, the Trump administration swiftly recalibrated its trade policy toward Europe, reactivating tariffs as a policy tool, making the EU realize that compromise and concession to the US can only bring temporary peace, but cannot guarantee its own long-term trade interests. After repeated tariff threats and broken promises, the EU has gradually woken up: Only by picking up the weapon of retaliation can it defend its own economic and trade rights and interests.

EU is losing its tolerance

The EU dusting off its tariff list is essentially an inevitable choice after its "institutional tolerance" space is exhausted, and it is also a concrete manifestation of Europe's promotion of "strategic autonomy" in the economic and trade field. For a long time, due to geopolitical considerations and the reality of in-depth economic and trade binding, the EU has always maintained restraint in trade frictions with the US. Even when encountering unfair treatment, it is more inclined to resolve differences through multilateral negotiations and seeking exemptions rather than immediately taking reciprocal retaliation. In 2021, the EU agreed to temporarily suspend WTO dispute settlement proceedings in exchange for US exemptions on steel and aluminum tariffs. As part of this negotiated arrangement, Brussels also paused planned retaliatory measures, reflecting its long-standing preference for de-escalation and accommodation in managing trade frictions with Washington.

However, US unilateralist policies have never abated due to the EU's tolerance, but have become more and more aggressive, constantly breaking through the bottom line of EU interests. In addition to traditional industries such as steel, aluminum and automobiles, the US has recently threatened to impose additional tariffs on Europe's high-tech industries such as pharmaceuticals and semiconductors, which will not only impact the development of Europe's core industries but also hinder the process of Europe's industrial transformation and upgrading.

Some economists warn that a new trade war could increase recession risks in the euro zone and weigh on growth in 2025 and 2026. Against this background, a retaliatory tariff list worth tens of billions of euros formulated last year has been reactivated. The list accurately targets products such as Boeing aircraft, bourbon whiskey and soybeans, which the EU does not rely on the US but can use to exert political and economic pressure on the US. It not only minimizes damage to itself, but also sends a clear retaliatory signal, marking the shift of the EU's economic and trade policy towards the US from "passive tolerance" to "active rights protection".

It is worth noting that the EU picking up its tariff list again does not mean that it has made up its mind to launch a full-scale trade war with the US, and there are still certain variables at present. After all, the EU and the US are important trade partners with huge bilateral trade volumes. A full-scale trade war will only lead to "a lose-lose situation". European households may face further increases in living costs and high energy prices, which was also an important reason for the EU's earlier suspension of the tariff list.

US's unilateralism weakening its buffer zone  

One trend is becoming increasingly clear: US unilateralist policies are constantly weakening its most important "buffer zone," the institutional patience of its allies. For a long time, the US has been able to implement unilateralism and trade protectionism globally not only because of its own economic and military advantages, but also because of the acquiescence and compromise of its allies. In addition to the EU, traditional US allies such as Canada, Mexico and Japan have also been threatened by US tariffs many times in recent years and have taken retaliatory measures one after another. The US's unilateralist policies are putting it in a situation of being "betrayed by all allies".

Behind the EU's restart of the tariff list, the more profound impact is that the global trade system is entering a new stage of "self-protection," which is an inevitable result of the long-term accumulation of US unilateralism. Countries have begun to build their own trade security barriers and implement trade diversification strategies to cope with the risks brought by unilateralism.