While Australia’s Albanese government has refused to play tit-for-tat by imposing reciprocal tariffs on the United States, the European Union (EU) has no qualms about fighting tariffs with tariffs, despite admitting they’re against its better judgement.
Earlier this week, Brussels announced plans to implement countermeasures worth up to €26 billion on U.S. goods. This is in retaliation to President Donald Trump’s 25% tariffs on steel and aluminium imports.
Following weeks of diplomatic efforts to avoid tariffs, the EU's countermeasures, effective 1 April, reinstate duties on U.S. exports. These duties were initially targeted during Trump’s first term but squashed following negotiations with former President Joe Biden.
While the first round of measures worth €4.5 billion includes items like bourbon, jeans, and Harley-Davidson motorcycles, effective mid-April round two applies to various steel and aluminium products plus agricultural goods like poultry, beef, seafood, and nuts.
However, these measures require approval from EU member states and further industry consultations before taking effect.
Politically targeted tariffs
European Commission President Ursula von der Leyen recently admitted that “tariffs are taxes. They are bad for business and worse for consumers… They are disrupting supply chains. They bring uncertainty for the economy.”
Meanwhile, one senior EU official confirmed that the EU bloc would strategically target politically sensitive U.S. exports. He cited soya beans grown in Louisiana, the home state of U.S. House Speaker Mike Johnson.
“We love soybeans, but we’re happy to buy them from Brazil or from Argentina or from anywhere else,” the official noted.
Future measures
While EU officials have mooted expanding countermeasures to include digital services and intellectual property rights if necessary, they're also considering “safeguard measures” against steel and aluminium imports from other countries if U.S. trade barriers lead to a surge in foreign metal imports into Europe.
Like Australia, the UK has refrained from imposing countermeasures, preferring to “keep all options on the table” while negotiating an economic deal with Washington.
Meanwhile, UK Steel, a trade association, has expressed concerns that Trump’s tariffs would harm British suppliers.
Do tariffs work?
While steel and aluminium tariffs are intended to boost domestic production, previous measures under Trump’s first term hiked costs for industries reliant on imported metals.
Findings from a 2023 study by the U.S. International Trade Commission concluded that outcomes are mixed at best.
While the 2018 tariffs marginally expanded domestic steel and aluminium production, heightened costs for manufacturers resulted in a net economic loss of over $3 billion.
Meanwhile, Trump hastily backed down on threats to double tariffs on Canadian steel and aluminium. This was after Ontario Premier Doug Ford threatened a 25% surcharge on electricity exports to the U.S.
