Latest EU Developments in the Trade War

As the first new U.S. tariffs start to apply to the EU, countermeasures are imposed and will impact many supply chains.

The US Steel and Aluminium tariffs

As explained in our blogpost of 13 February 2025, the first  new U.S. tariffs to apply to the EU and the UK are the reinforced tariffs on steel and aluminium which entered into force as scheduled at 5.00 am CET on 12 March 2025. 

The EU, as when the earlier steel and aluminium tariffs were introduced in 2018, takes the view that the US tariffs on steel and aluminium are safeguard measures – indeed unlawful safeguard measures – and considers that it has a right to rebalancing of tariff levels under Article 8 of the WTO Agreement on Safeguards.  A WTO panel has found that not to be so, but the report is unadopted and thus not binding because the US appealed it to an Appellate Body whose functioning it has blocked (a so-called appeal into the void).

The UK continued the EU measures when it definitively left the EU in 2021.

The immediate EU countermeasures

The EU imposed its rebalancing measures in two stages by means of Regulation 2018/886 (subsequently extended). They were adopted and subsequently amended and suspended by the Commission as implementing regulations based on the EU Enforcement Regulation that allows the enforcement of the EU's WTO rights.  Only the first stage of retaliation ever came into force because the EU and the US settled their dispute over the original steel and aluminium tariffs when the US granted the EU exemptions in the form of tariff rate quotas.  Both stages 1 and 2 of the rebalancing measures were suspended.   Conveniently, the current suspension expires on 31 March 2025 and the EU has announced (as we predicted) that it will not renew the suspension so the rebalancing measures will automatically apply to US goods from midnight CET on 31 March 2025.   The customs codes of the products subject to duties and the level of the duty can be found in the annexes to Regulation 2018/886.

Additional EU countermeasures

However, the new US duties cover more steel and aluminium products and include some products made from steel and aluminium, such as cooking utensils, window frames, chairs and radiators.  Also, the level of US duties on aluminium products has been increased from 10 to 25%.  The EU considers it important that the EU rebalancing measures match in terms of trade volume the products subject to the US tariffs and therefore has announced that it will introduce a new package of countermeasures based on its Enforcement Regulation. The Commission has announced that it will target an additional $18 billion of US goods.

A consultation has been launched to select the additional products on which duties should be imposed and interested parties may submit comments on the Commission's provisional list (accessible here) and suggestions for additional products to be subject to duties.

The factors on which the EU is likely to wish to base its new list include:

• Products for which ample alternative sources of supply exist, in particular in the EU (for example, many agricultural products). The stated aim of the countermeasures is to  impact the US without damaging the EU. 
• So-called "iconic" products that are likely to attract attention. Harley Davidson motorcycles, Levi jeans and bourbon whiskey are already subject to duties.
• Products manufactured in swing States.
• Products from US States represented by members of Congress supporting aggressive trade action.
• Products manufactured by US companies supporting aggressive trade action.
• Products, which the EU might consider undesirable for any reason (including for environmental reasons).

The consultation is open for two weeks and will terminate on 26 March 2025, after which the Commission will draw up its definitive list and proceed to adoption.   Importantly, this will be by implementing regulation which can be adopted by the Commission alone and only prevented if a qualified majority of Member States oppose it.

Conclusion

The EU has stressed that it is open to dialogue and that its countermeasures can be withdrawn or suspended as quickly as they have been imposed in response to willingness on the part of the US to return to a cooperative approach based on negotiations.

Whether the US approach of imposing measures and then seeking to negotiate their removal in exchange for concessions works or not remains to be seen.  The EU does not seem prepared to accept it, and wait to see how other countries around the world will react.  The UK, for example, does not appear to be in a hurry to follow the EU in reimposing its suspended rebalancing measures or in adopting additional measures.

The trade war between the US and the rest of the world has only just started since the US is preparing further and wider ranging action, for example, declaring VAT and other tax measures to be unfair and "discriminatory" against US companies.