Taking the Pulse: Should the EU bite the 10 per cent tariff bullet with the United States?

If the EU wanted a shot at pushing tariffs below 10 per cent, it would have had to retaliate forcefully alongside China after Liberation Day, on April 2, 2025. But a 10 per cent tariff is manageable for EU exports and was priced in by Wall Street. The real threat lies in much higher sectoral tariffs: on semiconductors, autos, and pharmaceuticals.

The UK accepted the 10 per cent tariff and secured exemptions. But the UK is an industrial dwarf: US President Donald Trump is unlikely to offer the same to the EU, which exports far more to the United States.

Trump responds to strength. To lower sectoral tariffs meaningfully, the EU will need to retaliate in-sector or hit US services via the anti-coercion instrument to raise the domestic political costs in the United States. So, Europe should strike back – though too few EU member states seem to have the stomach for it. Joint retaliation with Japan or South Korea would help, but they too fear Washington might pull security guarantees.

Trump wants tariffs on the EU – and he will probably get them. Divide et impera. What makes it worse: Unlike Asia’s heavyweights, the EU may be the only bloc delivering the macroeconomic rebalancing the United States has demanded. The bittersweet result: Europe will suck in more Chinese imports, to the detriment of EU industry.

Read full article here