EU scrambles to avert trade crisis as US tariff deadline looms

[EUROPE] With greater US tariffs postponed for 90 days, European Union finance ministers will discuss on April 11 how to use that time to reach a trade agreement with Washington and how to coordinate their efforts to deal with higher tariffs if they don't. US President Donald Trump halted for 90 days on April 9 the reciprocal tariffs of 20% he slapped on Europe on April 2, however a 10% charge remains in force, as it does with the majority of other countries worldwide. He also stated that he expected Europe to buy more US oil and gas as part of the trade rebalancing process.

The temporary reprieve comes amid growing concerns over escalating trade tensions between the EU and the US, which have already disrupted supply chains and dampened investor confidence. Analysts warn that prolonged uncertainty could further weigh on Europe’s fragile economic recovery, particularly in export-dependent sectors. The European Automobile Manufacturers’ Association, for instance, has flagged potential job losses and production cuts if higher tariffs are eventually imposed.

"The fact that we will have 90 days respite is, quite frankly, very helpful, because it means that we can now strategize and prepare ourselves in case there is no trade to deal with the Americans," said a senior EU source involved in the ministerial talks preparations. The European Commission, which oversees trade policy for the entire 27-nation EU, handles negotiations with Washington on how to avoid increased taxes completely.

Behind the scenes, EU trade negotiators are reportedly exploring concessions on regulatory standards for US products, particularly in agriculture and pharmaceuticals, to secure a compromise. However, any such moves could face resistance from member states like France and Ireland, which have historically opposed lowering food safety or environmental protections in trade deals.

If a trade agreement with the United States is reached within the next three months, maybe along the lines of the EU's zero-tariff proposal on all industrial imports, the problem will be solved. However, a no-deal outcome is also possible, leaving the reaction in the hands of the 27 EU governments, who will be tasked with assisting the most affected industrial sectors. Steel, aluminum, automobiles, lumber, and medicines are among the industries hardest hit. Steel, aluminum, and automobiles already face 25% tariffs in the United States.

In anticipation of a no-deal scenario, several EU countries have begun drafting contingency plans, including state aid for affected industries and tax incentives to offset tariff costs. Germany, Europe’s largest economy, is reportedly considering targeted subsidies for its automotive sector, while Italy has floated the idea of temporary export credits for small and medium-sized manufacturers.

The European Central Bank (ECB) and the European Commission believe that the impact of US tariffs on the EU economy would be significant, ranging from 0.5% to 1% of GDP. Given that the EU economy as a whole is expected to grow 0.9% in 2025, according to the ECB, US tariffs could drive the EU into recession. Coordination of industry support will be critical because some governments have larger public budgets and can afford to assist their industries, while others cannot. Such imbalance would distort fair competition in the EU's single market.

Experts suggest that the EU could leverage its collective bargaining power by accelerating trade talks with other major partners, such as China and Mercosur nations, to diversify export markets. The bloc recently concluded a long-pending agreement with New Zealand and is fast-tracking ratification of the deal with Chile, signaling a broader strategy to reduce reliance on US trade.

“Ministers will share their view as to how one could react at the national level, but then the idea is to coordinate, because we wouldn’t like to see a race to flood national markets with money in an uncoordinated way,” the official said on condition of anonymity.

“Not every member state has the same fiscal space. So that’s why we have this discussion on national reactions and the coordination of our national responses in a way that would not be harmful to the single market,” the official added.

The EU's single market of 450 million consumers is one of the bloc's most valuable assets in any trade dispute, but to make it truly effective, the EU must decrease the regulatory barriers that function as tariffs. The International Monetary Fund estimates that intra-EU trade barriers are comparable to a 44% tariff on products and a 110 percent tariff on services. As a key response to US tariffs, EU ministers are expected to focus on eliminating these trade barriers.