EU braces for higher prices as US trade war ramps up

Former U.S. President Donald Trump's policy of imposing 25% tariffs on steel and aluminum has officially taken effect, a move that swiftly triggered countermeasures from the European Union. Despite it being just past 6:00 AM in Brussels on Wednesday, and midnight in Washington D.C., the EU responded immediately.

European Commission President Ursula von der Leyen stated clearly: "Tariffs are taxes. They are bad for business and even worse for consumers." The EU plans to implement initial countermeasures, effective April 1st, mirroring the approach taken by the Trump administration when it first imposed tariffs in 2018 and 2020.

Further measures are expected to be unveiled in mid-April. A range of textiles, household appliances, food products, and agricultural goods may be included in the retaliation list, depending on the outcome of a two-week consultation with stakeholders. A nearly 100-page list of goods is circulating, encompassing items such as meat, dairy products, fruits, wines and spirits, toilet seats, timber, coats, swimwear, pajamas, shoes, chandeliers, and lawnmowers.

For consumers, price increases on American products on European supermarket shelves are now inevitable. Dirk Jandura, head of the German Association for Wholesale, Foreign Trade and Services (BGA), warned that Germans may have to spend more to buy American goods, with products like orange juice, bourbon whiskey, and peanut butter potentially being hit hardest. "Trade margins are so low that companies cannot absorb these costs themselves," he stated. The EU plans to take action on $26 billion euros (£22 billion) worth of U.S. exports.

European Council President António Costa has called on the U.S. to de-escalate the situation, but Trump has vowed to retaliate against the EU's countermeasures, showing no signs of easing tensions. "We have been abused for a long time, and we will not be abused anymore," Trump said. Christoph Neumayer, head of the Federation of Austrian Industries, also expressed concern about the escalation, emphasizing that Europe must act united and decisively, as the U.S. is Austria's second-largest export market after Germany, and Germany's most important export market.

An EU official pointed out that products like soybeans and orange juice can easily be sourced from Brazil or Argentina, so consumers will not be significantly affected. Furthermore, some of the targeted U.S. exports come from Republican-controlled states, such as soybeans from Louisiana or meat from Nebraska and Kansas. A significant amount of U.S. exports enter the EU through the Dutch port of Rotterdam or the Belgian port of Antwerp.

Dutch Minister for Economic Affairs Dirk Beljaarts stated that no one benefits from a "tariff war," but he hopes it will not have too much of an impact on the Dutch economy: "This will have an impact on companies and consumers, especially in the United States." The beverage industry on both sides of the Atlantic will be particularly hard hit. Pauline Bastidon of Spirits Europe said that EU and U.S. producers are aligned, and European companies producing American spirits, as well as American companies investing heavily in the EU, are at risk.

Chris Swonger of the Distilled Spirits Council of the United States said that in the three years since the EU previously suspended its 25% tariff on American whiskey, U.S. distillers have "worked hard to regain their footing in their largest export market." The reimposition of tariffs from April 1st is "extremely disappointing." French cognac producers also face a significant problem with the U.S. imposing a 25% import tax, as most of their product is destined for export, either to the U.S. or to China. Bastien Brusaferro of the General Confederation of Winegrowers said: "Morale is low." In the Charente region alone, thousands of jobs are at risk: "Cognac is a product that is made for export."

Henrik Adam, head of the European Steel Association, also issued a stark warning. "President Trump's 'America First' policy has the potential to be the last straw for the European steel industry," he warned. Trump's initial tariffs on European steel in 2018 led to a reduction of more than one million tons in EU steel exports to the U.S., and for every three tons of steel that could not enter the U.S., two-thirds of it instead entered the EU. "These new measures implemented by Trump are broader, so the impact of the U.S. tariffs could be even greater."