Europe is facing an all-out trade war, and Donald Trump is not the only adversary.
By slapping steep tariffs on America’s imports of steel and aluminum, the U.S. president on Thursday ignited a global war that is likely to bring Europe into conflict with countries ranging from Brazil to Japan.
As the world’s biggest trade bloc and the second biggest steel producer after China, the EU will play a key role in the impending struggle.
Direct retaliation against Washington will only be one dimension of the broader showdown. The far more complex challenge for Brussels will be calculating how to cope with the sudden shifts in global steel supply caused by Trump pulling down the trade barriers in the U.S.
Big producers such as South Korea, Japan, Brazil and China will now be seeking new markets in Europe, and the EU is already looking to deter them with so-called “safeguard measures.”
Shortly after Trump announced additional tariffs of 25 percent on steel and 10 percent on aluminum, European Commission President Jean-Claude Juncker responded that the EU would take the fight straight back to Washington.
“The Commission will bring forward in the next few days a proposal for World Trade Organization-compatible countermeasures against the U.S. to rebalance the situation,” he said. “The EU has been a close security ally of the U.S. for decades. We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk. I had the occasion to say that the EU would react adequately and that’s what we will do.”
The EU’s direct retaliation plans are likely to include counterstrikes against iconic U.S. brands such as whiskey from Kentucky, orange juice from Florida and Harley-Davidson motorbikes, which have all been cited as potential targets in previous trade face-offs with the United States.
It fell to European Commissioner for Trade Cecilia Malmström to say that the EU was preparing for a broader fight. “The Commission will monitor market developments and if necessary will propose WTO-compatible safeguard action to preserve the stability of the EU market,” she said.
The World Trade Organization allows these protective measures in cases of sudden surges, such as steel flows being diverted from the U.S. market.
U.S. Commerce Secretary Wilbur Ross has suggested that there could be a positive domino effect in safeguard measures for developed markets. With one market after another shutting out imports to keep the steel surge out, producers in every country would have to focus on supplying their home market. The ultimate victim should be China, which would start to choke on its massive overcapacity.
“If other countries adopt something similar to what we are doing, then you have in hand a solution to the global problem,” he said. “Thus far, no one has stepped into a leadership role … In essence, these recommendations are that the U.S. step into that leadership role and encourage other countries to adopt similar measures.”
In anticipation of Washington’s announcement, France, Germany, Italy and Spain met on Tuesday to agree to impose safeguard measures if Trump imposed tariffs on Asian steel.
“Absolutely, we have to talk about safeguard measures as well,” Germany’s state secretary at the ministry for the economy, Matthias Machnig, said. “And we had a discussion this morning together with Italy, France and Spain and Germany, and we totally agree on these issues.”
Only hours before Trump’s announcement, European Commission Vice President Jyrki Katainen had said that the trade war would not be “only a problem between Europe and the United States because it has an impact to steel production, the steel market elsewhere too.”
“We can end up easily in a situation where we are in a trade war with the two fronts,” said Katainen. “And only because of one decision made by the president of the United States.”