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Trump's tariff threat shakes EU-US trade relations
US President Donald Trump announced plans on Saturday to impose tariffs on eight European nations unless they back his proposal to purchase Greenland. The move has sparked alarm across the European Union, with leaders weighing retaliatory measures.
Escalating trade tensions
Trump warned of a 10% levy on imports from the targeted countries starting 1 February, rising to 25% by summer if no agreement is reached. It remains unclear whether these tariffs would stack on top of existing duties. The affected nations-France, Germany, the UK, Denmark, Norway, Sweden, the Netherlands, and Finland-have signaled readiness to respond if the US proceeds.
EU's prepared response
Less than six months ago, the EU and US struck a trade deal aimed at stabilizing transatlantic commerce. Under the agreement, the EU suspended planned retaliatory tariffs on $108 billion worth of US goods, including livestock, aircraft parts, and whiskey. However, Trump's latest threat has derailed progress, with German MEP Manfred Weber declaring the deal's ratification "not possible at this stage."
Without EU approval, the suspended tariffs will automatically take effect on 7 February, risking backlash from US exporters. European Commission spokesperson Olof Gill emphasized Brussels' commitment to protecting EU interests but cautioned that tariffs would harm businesses and consumers on both sides.
The EU's 'trade bazooka'
The Anti-Coercion Instrument (ACI), dubbed the "trade bazooka," allows the EU to retaliate against economic coercion. Measures could include tariffs, import restrictions, or even blocking access to the single market. However, deploying the ACI is a lengthy process, requiring up to four months for investigation, six months for negotiations, and 10 weeks for member-state approval. Even if triggered now, retaliation could take a year.
UK seeks to avoid trade war
UK Prime Minister Sir Keir Starmer ruled out immediate retaliatory tariffs, stressing that a trade war benefits no one. Instead, the UK could explore alternatives like raising the Digital Services Tax, currently set at 2% for tech giants with global sales exceeding £500 million and UK revenue above £25 million. Companies like Amazon and Meta could be affected.
Legal uncertainties cloud Trump's move
The legality of Trump's tariffs remains in question. The US Supreme Court is reviewing whether the president exceeded his authority by imposing taxes under the International Emergency Economic Powers Act. A ruling could determine the fate of existing tariffs, including a 10% levy on British goods introduced last year.
