EU Draws Red Line: Brussels Offers Zero Tariffs But Warns of Retaliation Against Trump’s Trade War

The European Union has expressed its openness to negotiating a zero-tariff agreement on industrial goods with the United States, while simultaneously preparing to respond to new American trade barriers. Following a meeting of EU trade ministers in Luxembourg on Monday, officials emphasized the need to avoid a full-blown trade war but confirmed that retaliatory measures were being finalized.

EU Trade Commissioner Maros Sefcovic stated that the bloc's counter-tariff list was being completed and would be shaped based on input from member states. Although the EU initially considered targeting US goods worth up to €26 billion, Sefcovic said the final figure would be lower in order to reflect member state concerns.

European Commission President Ursula von der Leyen reiterated that the EU is ready to enter talks with Washington on a “zero-for-zero” industrial tariff pact. Nevertheless, the bloc plans to introduce retaliatory tariffs starting April 15, with a second round scheduled for May 15, as a response to US tariffs on European steel and aluminium.

Internal Divisions and Strategic Deliberations

While many EU countries support a firm but proportional response to the US actions, internal debates continue over the best course of action. The first wave of EU tariffs is expected to be approved on Wednesday and could include American products such as bourbon whiskey. However, the inclusion of whiskey remains uncertain due to threats from US President Donald Trump to impose a 200 percent duty on European wines and spirits should the EU proceed.

France, Italy, and Spain have pushed for removing whiskey from the list to prevent an escalation. One EU diplomat emphasized the need for a balanced approach that protects vulnerable EU economies while avoiding undue harm to European industries.

The second wave of countermeasures, aimed at broader US tariffs on cars and other goods, is still under negotiation. Larger EU economies like Germany and France appear more willing to adopt tougher tools such as restricting US access to EU public contracts. In contrast, countries like Ireland, Italy, and Spain urge caution, fearing market instability.

Financial Market Fallout and US Pressure

Markets across Europe and the US have reacted sharply to the renewed trade tensions. The Euro STOXX 50 index dropped by 4.7% on Monday, marking its worst day since early March 2022. On Wall Street, the S&P 500 slipped into bear market territory, falling 3.2% at the open, with the Nasdaq and Dow Jones posting similar losses.

President Trump, while denying any intention to destabilize markets, stood firm on his trade policies. He emphasized that the US would not engage in talks with the EU unless “they pay us a lot of money on a yearly basis — not just for the present, but also for the past.” He has imposed 25 percent tariffs on EU steel, aluminium, and cars, and 20 percent duties on most other goods, in line with his ongoing effort to eliminate US trade deficits.

While the EU continues to stress diplomacy and negotiation, it has made clear that it will not shy away from escalating the situation if needed. The Anti-Coercion Instrument (ACI) — which would restrict American companies from participating in EU public tenders — remains a tool of last resort, with countries like Ireland describing it as a “nuclear option.”