EU Postpones Countermeasures Against US Tariffs Following Trump’s Decision

The European Union has decided to hold off on implementing its initial countermeasures against US tariffs, according to European Commission President Ursula von der Leyen. This decision comes after President Donald Trump temporarily reduced the significant duties he had recently imposed on numerous countries.

The EU was preparing to introduce counter-tariffs on approximately 21 billion euros ($23.25 billion) worth of US imports starting next Tuesday. This was in response to Trump’s 25% tariffs on steel and aluminum. The bloc is still evaluating its response to US car tariffs and the broader 10% levies that remain in effect.

“We want to give negotiations a chance,” von der Leyen stated on X. “While finalizing the adoption of the EU countermeasures, which saw strong support from our Member States, we will put them on hold for 90 days.”

Trump’s unexpected decision on Wednesday to suspend most of his new duties provided relief to strained global markets and concerned global leaders, even as he intensified a trade war with China.

This reversal occurred less than 24 hours after the new tariffs took effect and followed a period of intense financial market volatility, reminiscent of the early stages of the COVID-19 pandemic.

US stock indexes saw a significant increase following the announcement, and this positive momentum continued into Asian and European trading on Thursday.

Prior to Trump’s change of course, the turmoil had wiped trillions of dollars from stock markets and triggered an unsettling rise in US government bond yields, which seemed to capture the US president’s attention.

However, Trump maintained pressure on China, the world’s second-largest economy and the second-biggest provider of US imports, by increasing tariffs on Chinese imports to 125% from the 104% level that took effect on Wednesday.

He also signed an executive order aimed at curbing China’s influence on the global shipping industry and revitalizing US shipbuilding.

Trade War with China

China has rejected what it describes as threats and blackmail from Washington.

Commerce Ministry spokesperson He Yongqian stated during a regular press briefing that China will “follow through to the end” if the US insists on its own terms. The ministry emphasized that China remains open to dialogue, but it must be based on mutual respect.

Beijing may again retaliate after imposing 84% tariffs on US imports on Wednesday, matching Trump’s earlier tariff measures.

Trump asserts that the tariffs are intended to address US trade imbalances and has indicated that a resolution with China on trade is still possible. However, officials have stated that they will prioritize discussions with other countries, as Vietnam, Japan, South Korea, and others seek to negotiate deals.

The Chinese yuan reached its lowest level against the dollar on Thursday since the global financial crisis.

EU Pause

In Europe, euro zone government bond yields increased, spreads tightened, and markets reduced their expectations for European Central Bank rate cuts following Trump’s recent announcement. European shares experienced a surge.

Von der Leyen described Trump’s move as an important step toward stabilizing the global economy before announcing the suspension of the EU’s counter-tariffs.

However, she cautioned that these measures could be reinstated.

“If negotiations are not satisfactory, our countermeasures will kick in. Preparatory work on further countermeasures continues,” she said, adding, “As I have said before, all options remain on the table.”

Trump’s reversal on tariffs is not absolute. A 10% blanket duty on almost all US imports will remain in effect, according to the White House. The announcement does not appear to affect existing duties on autos, steel, and aluminum.

The US tariff pause also does not apply to duties paid by Canada and Mexico, as their goods are still subject to 25% fentanyl-related tariffs if they do not comply with the US-Mexico-Canada trade agreement’s rules of origin.

The EU had planned to impose additional tariffs on US imports, including maize, wheat, motorcycles, poultry, fruit, and clothing. These tariffs are now suspended.

Elsewhere, India has expressed its desire to expedite a trade deal with the United States.

Uncertainty and Concerns

Meanwhile, oil prices declined by 2% on Thursday due to concerns about a deepening US-China trade war and a potential recession, overshadowing the initial relief from Trump’s announcement of a pause.

Some central bankers also remain cautious.

European Central Bank policymaker Francois Villeroy de Galhau described the pause in the tariff hike as “less bad news” than before, but noted that uncertainty persists and poses a threat to trust and growth during an interview with France Inter Radio.

Business leaders have also warned that not all issues have been resolved.

The head of the French wine and spirits lobby group FEVS referred to Trump’s decision to pause as “half good news.”

Nicolas Ozanam explained that the move will initially allow French wine and spirits companies to resume shipments with lower tariffs, putting them on par with other suppliers.

However, the 90-day window creates logistical challenges, and the existing 10% custom duties continue to exert inflationary pressures on the sector.

“This will still lead to a rise in prices and therefore a drop in consumption in the United States,” he told Reuters.