EU Plans To Engage More With Other Nations Hit By US Tariffs

The EU is preparing to step up its engagement with other countries hit by Donald Trump’s tariffs following a slew of new threats to the bloc and other US trading partners, according to people familiar with the matter.

The contacts with nations including Canada and Japan could include the potential for coordination, said the people, who spoke on condition of anonymity to discuss private deliberations.

The move comes as talks between the EU and the US have dragged on and continue to be stuck on several issues, including cars and tariff rates on agriculture.

Member states were briefed on the status of talks on Sunday.

Earlier in the day, European Commission chief Ursula von der Leyen said the bloc will extend the suspension of trade countermeasures against the US until Aug. 1 to allow for further talks. The measures had been adopted in response to tariffs imposed earlier by Trump on steel and aluminum before being paused a first time, and were due to snap back into place at midnight on Tuesday.

“At the same time, we will continue to prepare further countermeasures so we are fully prepared,” von der Leyen told reporters in Brussels on Sunday, while reiterating the EU’s preference for a “negotiated solution.”

The current list of countermeasures would hit about €21 billion ($24.5 billion) of US goods, while the EU has another one ready of about €72 billion, as well as some export controls, that will be presented to member states as early as Monday, said the people. 

Von der Leyen also said that the EU’s anti-coercion instrument, the bloc’s most powerful trade tool, won’t be used at this point. “The ACI is created for extraordinary situations,” she said. “We are not there yet.”

In a social media post responding to Trump’s announcement, French President Emmanuel Macron called for the speeding-up of preparations for credible countermeasures, including the anti-coercion tool, if no agreement is reached by Aug. 1.

German Chancellor Friedrich Merz on Sunday evening said 30% tariffs would hit exporters in Europe’s largest economy “to the core” if a negotiated solution in the trade conflict can’t be found. 

Merz said he was coordinating closely with other leaders to ensure tariffs of such magnitude don’t come into force. “That requires two things: unity in the European Union and good lines of communication with the American president,” the conservative leader told ARD in an interview. 

The proposed 30% tariff rate, together with existing sectoral duties and an expected levy on critical goods would take the increase in the US effective tariff rate on the EU to 26 percentage points, Goldman Sachs Group Inc. economists including Sven Jari Stehn wrote in a note. If implemented and sustained, that would lower euro area GDP by a cumulative 1.2% through end-2026, with most of the hit still to come. 

“The EU would likely retaliate to a 30% across-the-board tariff in a gradual way starting on the day new US tariffs are implemented, raising the risk of further trade escalation,” the Goldman Sachs economists wrote. Still, the latest threat “might well be a negotiating tactic,” so the economists are sticking to their base case where current tariff levels are agreed, including 10% on all goods and 25% on steel, aluminium and autos. 

Trump has sent letters to a slew of trading partners, tweaking tariff levels proposed in April and inviting them to further talks. In a letter published Saturday, the US president warned the EU it would face a 30% rate from next month if better terms can’t be negotiated. 

The EU is talking with the US on trade, Trump told reporters at Joint Base Andrews in Maryland on Sunday. 

The EU had sought to conclude a tentative deal with the US to stave off higher tariffs, but Trump’s letter punctured recent optimism in Brussels over the prospects for an 11th-hour agreement. Other countries like Mexico, which has also been negotiating with the US, were surprised to receive similar letters.

The EU is seeking a tariff no higher than 10% on agricultural exports. An offset mechanism that some carmakers had pushed as a way to grant tariff relief to companies in return for investments in the US isn’t under consideration for now, amid worries from the EU that it could shift production across the Atlantic.

The bloc’s negotiators are focusing talks on car tariffs instead, according to people familiar with the matter, who spoke on condition of anonymity to discuss private deliberations.

Negotiations between the US and EU are expected to continue this week, said the people.

The US and the EU have been discussing an initial deal that would see most EU exports hit with a 10% tariff, with limited exemptions for some industries such as aviation and medical devices, Bloomberg previously reported. The EU has also been arguing for lower rates on spirits and wines, as well as mitigating through quotas the 50% tariffs that Trump has imposed on steel and aluminum. The US has proposed a 17% tariff on agricultural products. Any initial agreement would also cover non-tariff barriers, economic security cooperation and strategic purchases.

In addition to a universal levy now due in August, Trump has also introduced 25% levies on cars and parts, as well as double that on metals. The president is working to introduce sectoral levies in other areas, including pharmaceuticals and semiconductors, and recently announced a 50% duty on copper.

Any deal at this stage wouldn’t automatically shield the EU from those sectoral measures, but the bloc continues to seek preferential treatment in the potentially affected industries.