EU Prepares €100 Billion Tariff Threat as US Trade Tensions Escalate

The European Union is bracing for a potential trade showdown with the United States, signaling it could impose tariffs on up to €100 billion ($107 billion) worth of American goods if ongoing negotiations fail to resolve escalating disputes. This move comes after months of rising tensions triggered by the Trump administration’s decision to reinstate and expand tariffs on European steel, aluminum, and automobiles, alongside threats of a 20% tariff on most EU imports.

Key Details of the EU’s Tariff Plans

• The European Commission has initiated a formal consultation process with member states and industry stakeholders to finalize a list of US products that could face new tariffs. Targeted items include agricultural goods (such as soybeans, meats, and bourbon), manufactured products (including airplane and car parts), and a range of processed foods and beverages.
• The EU’s retaliatory measures are designed to pressure Washington into serious negotiations, with the bloc emphasizing its preference for a negotiated solution but making clear it is prepared to act if necessary. European Commission President Ursula von der Leyen stated, “We believe there are good deals to be made for the benefit of consumers and businesses on both sides of the Atlantic… At the same time, we continue preparing for all possibilities”.
• The US tariffs, initially set at 20%, have been temporarily paused for 90 days, with a reduced 10% duty in place while talks continue. However, the suspension expires in mid-July, and the threat of a full tariff escalation remains if no agreement is reached.

Economic Impact and Broader Context

• The tariff standoff has already prompted the EU to sharply downgrade its economic growth forecasts for 2025. The European Commission now expects the eurozone to grow by only 0.9% and the wider EU by 1.1%, down from earlier projections of 1.3% and 1.5%, respectively. Major economies such as Germany and France are facing stagnation or reduced growth, with Germany’s exports particularly hard hit by the uncertainty.
• The EU’s trade agenda is not limited to its US dispute. The bloc recently concluded a landmark Digital Trade Agreement with Singapore, aiming to set global standards for cross-border data flows and digital commerce. Additionally, the EU has ratified its 17th sanctions package against Russia, targeting the Russian tanker fleet in an effort to curb the Kremlin’s ability to finance its military actions in Ukraine.
• Economic forecasts for 2025 show a mixed picture across the EU, with Malta projected to lead growth at 4.1%, while Austria is expected to see a slight contraction of -0.3%.

Strategic Priorities and Outlook

EU leaders are balancing the need to defend European industries with efforts to maintain open trade and strengthen alliances. Alongside its tough stance on US tariffs, the EU is prioritizing sustainability, defense, and closer ties with partners such as the UK to navigate an increasingly complex global landscape.

The coming weeks will be critical as both sides weigh the costs of a trade war against the benefits of compromise. While the EU has made clear it prefers dialogue, its €100 billion tariff threat underscores the seriousness of its intent should negotiations break down.