US trade war: EU poised to "respond firmly"

Global trade tensions are escalating after President Trump slapped sweeping tariffs over the weekend on three of the US’s biggest trading partners—Canada, China, and Mexico.

The EU, which has the world's largest trade and investment ties with the US, is keeping a close watch on the situation.

“At this time, we are not aware of any additional tariffs being imposed on EU products,” a spokesperson for the European Commission told The Financial Times on Sunday. “However, the EU would respond firmly to any trading partner that unfairly or arbitrarily imposes tariffs on EU goods,” they added.

Secret lists

For months, the EU’s trade department has been preparing lists of American imports that could face tariffs of up to 50% if Trump escalates the trade war. However, these plans are being kept under wraps to avoid provoking a response from President Trump, according to the Financial Times.

In the meantime, growing numbers of prominent EU politicians and business leaders have been speaking out against the U.S. leader’s strategy.

“Europe will not want to be pushed around. We are also a powerful trade bloc with 400m consumers,” Klaas Knot, a member of the governing council of the European Central Bank, told Dutch television on Sunday.

He said that he expected countries affected by trade tariffs to retaliate against US measures and exacerbate a trade war that would damage all sides.

French Prime Minister François Bayrou has called on EU nations to present a united front if Trump follows through on his tariff threats. Speaking to French weekend newspaper La Tribune Dimanche, he warned that acting in self-interest would weaken the bloc, The Financial Times reports. "If we each only defend our own corner, we’ll vanish," he said.

Sweden’s Foreign Trade Minister Benjamin Dousa told Swedish public service television network SVT that he feared “major consequences for Swedish companies” if President Trump’s approach ended up triggering a large-scale trade war.

However German Finance Minister Jörg Kukies argued that the European Union should avoid a knee-jerk panic reaction to the U.S. President's approach, in a comment to Bloomberg.

Trump invoked the International Emergency Economic Powers Act to justify broad tariffs against Canada and Mexico, a law that enables action in response to what is deemed an “unusual and extraordinary threat.” To apply the same approach to the EU, he would need to establish a similar justification or argue for tariffs on specific industries under national security grounds, as he did during his first term, The Financial Times explains.

European stocks slide as trade war fears mount

European markets opened sharply lower on Monday as investor jitters over Donald Trump’s latest tariff measures sent stocks tumbling.

Germany’s DAX slumped 2% at the open, while France’s CAC 40 fell 1.9%. Spain’s IBEX dropped 1.7%, and Italy’s FTSE MIB slid 1.4% as fears of escalating trade tensions unsettled investors.

Naeem Aslam, chief investment officer at Zaye Capital Markets, told The Guardian that markets are bracing for increased volatility, warning that European economies—deeply connected to US trade policies—could face serious headwinds.