Germany, France Urge EU to Prepare Trade Retaliation Against US Tariffs

In a significant shift, Germany has joined France in urging the European Union to prepare for trade retaliation against the United States. This move comes as the deadline for tariffs approaches, with both countries advocating for a strong response to the U.S. threat of increased tariffs on European goods. The U.S. has threatened to raise tariffs on European imports to 30% starting August 1, a move that has prompted a hardline stance from the EU.

Germany, which had previously been more inclined towards negotiation, has now aligned with France's position of "an eye for an eye." This shift was triggered by a letter from the U.S. threatening to increase tariffs from the current 10% to 30% starting August 1. This threat has exacerbated the resentment among EU member states, leading Germany to adopt a more aggressive stance. Officials have noted that this letter has hardened the attitudes of many member states, with Germany making a 180-degree turn in just a few days. Most countries now want to take concrete steps to increase their bargaining power.

The EU is considering the use of its "anti-coercion instrument" (ACI), a tool that has never been used before and is often referred to as the EU's "trade nuclear weapon." If activated, the ACI would allow the EU to ban U.S. companies from participating in EU government procurement, revoke protection for their intellectual property, and restrict trade between the U.S. and the EU. While Germany and France are in favor of using the ACI, some member states are cautious, fearing that it could provoke further retaliation from the U.S.

An EU diplomat noted that there is a silent majority opposed to triggering the ACI, describing it as akin to using nuclear weapons in the current unstable situation. The EU Commission can only proceed with the ACI if it secures the support of a "qualified majority" of member states. Diplomats emphasized that activating the ACI would only initiate an investigation and would not immediately result in retaliatory measures. If the Commission determines that the U.S. is coercing the EU, it will recommend countermeasures, which would then need to be approved by the member states. As one diplomat put it, "This is a measured response. The ACI can be a cannon or a sniper rifle."

The EU has prepared three rounds of retaliatory measures. The first round, set to begin on August 6, would impose tariffs on approximately 210 billion euros worth of U.S. products, including chicken meat and jeans. The second round would target around 720 billion euros worth of U.S. products, such as Boeing aircraft and bourbon whiskey. This plan is expected to be voted on before August 6, and if approved, would take effect the following day. Officials stressed that these measures are a last resort, as they would also harm EU businesses. No one wants to see transatlantic trade spiral downward.

In addition to these measures, the EU Commission is preparing a third list targeting the service sector. Proposed measures include taxing digital services and online advertising revenue. The EU Commission's trade spokesperson emphasized that no retaliatory measures will be implemented before August 1, as the focus remains on negotiations, which are the top priority at the moment.