Morning opening: A broken stick
Jakub Krupa
European Commission president Ursula von der Leyen warned this morning that the global economy “will massively suffer” as a result of tariffs imposed by US president Donald Trump last night, as she said the EU was “prepared to respond.”
Despite Trump’s direct attack on “pathetic” EU as he imposed 20% tariffs on the bloc, von der Leyen still expressed hopes that the relationship could “move from confrontation to negotiation,” as she warned “there seems to be no order in disorder.”
But it wasn’t immediately obvious that there was any genuine prospect of that happening.
Instead the EU and the individual member states are now scrambling to consider how to manage the situation.
French president Emmanuel Macron has called an emergency meeting with sectors affected by Trump’s tariffs this afternoon.
German economic daily Handelsblatt published new estimates this morning that the US tariffs – including 25% on car imports – could cost German carmakers BMW, Mercedes and Volkswagen as much as €11 bn given Germany is the largest EU car exporter to the US. For perspective, it’s just under a third of the total value of German automotive exports to the US at €36.8 bn.
But the worry is not only about the immediate impact, but the more long term consequences of last night’s decision.
Addressing Europeans directly, von der Leyen said “I know that many of you feel let down by our oldest ally,” as she stressed the need to think about what’s next.
Or as Moritz Schularick, president of the Kiel Institute for the World Economy, put it to Handelsblatt:
“There is this memorable picture of a stick that you can bend and that comes back again and again. But at some point, if you bend too much, the stick breaks.
I believe that in terms of trust in the United States, something has broken down in recent weeks that will not come back so quickly.”
It’s Thursday, 3 April 2025, it’s Jakub Krupa here, and this is Europe Live.
Good morning. Fasten your seatbelts, it’s going to be a lively one.
Key events
EU to respond in ‘proportionate and decisive way,’ but use of anti-coercion rules only ‘last resort,’ leading lawmaker says
Jennifer Rankin
The EU will respond in a “legitimate, proportionate and decisive way” to Donald Trump’s trade tariffs, but its strongest weapon is still “a last resort”, the head of the European parliament’s international trade committee has said.
Bernd Lange, a German Social Democrat, said the EU was discussing the use of the anti-coercion instrument, which EU insiders almost inevitably describe as “the big bazooka”.
The anti-coercion legislation, which entered into force in 2023, gives the EU wide leeway to impose commerce and investment sanctions against a foreign government deemed to be using trade in an attempt to browbeat countries into changing unrelated policies.
It was agreed not long after China had imposed trade restrictions on Lithuania over the Baltic state’s friendly policy towards Taiwan.
Lange, who helped negotiate the law, said the EU was discussing use of this instrument – “this is of course the bazooka, the strongest measure we could take” – but it would only be used as a last resort.
“This is not our first step. Using the ACI, this would really be hard escalation and therefore a last resort, but we have it.”
Having renamed Trump’s so-called “liberation day”, as “inflation day”, the MEP said that the EU could target US tech giants in retaliation for tariffs, which is possible even without the anti-coercion law. “Of course if we are really on an escalation ladder, then of course we will have a look to the tech giants as well – I would say this is not the first choice.”
The MEP, who travels to Washington next week, still hopes the EU can negotiate its way out of tariffs, but is not optimistic. He described the structure of the US government as “totally unclear” and that only the president and his trade adviser, Peter Navarro, controlled trade, rather than senior officials, such as the US Trade Representative, adding: “That is really a mess.”
EU’s options on responding to Trump’s tariffs
Jennifer Rankin
The EU has some options when considering its response to overnight announcements, including retaliating with tariffs on US goods and services and forming closer ties with other countries.
The bloc has already rejected one possible option: fold your cards. But vowing retaliation is only the start.
The questions are about what response the EU will have, how quickly it can be marshalled and whether divisions between member states will undermine the tough talk.
The EU response will depend on how tightly its 27 member states line up behind a common strategy in a trade war that could trigger economic turmoil and job losses in Europe. An early indication should come on Monday when EU trade ministers meet to discuss the retaliation planned for this month and other measures.
Nerves are building. France is worried about the fallout on its wines and spirits industry; Dublin fears an exodus of US multinationals headquartered in Ireland; and the Italian prime minister, Giorgia Meloni, has said the bloc should not act on impulse while the national industry group Confindustria has called for negotiations with the White House.
Forging a common line will be critical to new forms of trade retaliation: for example, only a weighted majority of EU countries can decide whether the bloc is facing coercion from the US. That would be an outcome almost no one imagined a decade ago.
German business group denounces ‘unprecedented attack’ on global trade
Lisa O’Carroll
The German Federation of Business, BDI, has denounced Trump’s tariffs as an “unprecedented attack” on global trade.
In a statement issued this morning, it warned that “the European economy must not become a plaything of geopolitical interests” and called for a united response to the 20% tax the 27 countries now face.
“The announced tariffs are an unprecedented attack on the international trading system, free trade, and global supply chains. The rationale for this protectionist escalation is incomprehensible. It threatens our export-oriented companies and jeopardizes prosperity, stability, jobs, innovation, and investment worldwide.
The European Union can only act as a united front. This applies to the 27 member states as well as across sectors. The EU has its own instruments for an effective counter-reaction, which it can use decisively. We support the Commission’s strategy of remaining willing to negotiate, aware of Europe’s strengths, and responding flexibly to potential offers.
German industry has always relied on fair competition, open markets, and cooperative relations with the United States. The EU must now strengthen its alliances with other major trading partners and should coordinate its response with them. A coordinated response is also necessary to counter diversion effects in international trade.”
Danish prime minister visits Greenland
Elsewhere, Danish prime minister Mette Frederiksen continues her three-day trip to Greenland amid escalating tensions with the US over the future status of the island.
Arriving yesterday, she said “it is clear that with the pressure put on Greenland by the Americans, in terms of sovereignty, borders and the future, we need to stay united.”
“I have but one wish and that is to do all that I can to take care of this marvellous country and to support it at a difficult time,” Frederiksen said.
She had a dinner with the new Greenlandic prime minister, Jens-Frederik Nielsen, last night, and today gets on with a full programme of meetings likely to touch on the future shape of Danish-Greenlandic relations and economic cooperation.
Frederiksen also met with the outgoing prime minister Múte B. Egede who will remain a prominent figure in the new government formed after last month’s snap elections in Greenland.
The talks will be a first test for Nielsen’s new administration on whether it can formulate new demands to Copenhagen and get things done in the face of US interest in the island.
Frederiksen’s visit comes just days after a highly controversial trip by US vice-president JD Vance, who came over to the US Pituffik Space Base only to directly criticise Denmark for “not doing a good job at keeping Greenland safe,” and accusing it of “underinvesting in the people of Greenland and … in the security architecture” of the island.
Earlier this week, Washington Post reported that the Trump administration was studying the potential costs involved should the US succeed in its plans of taking control over Greenland, including whether it could put together a more attractive financial package to compete with Denmark.
The paper said that officials were also looking at what revenue to the US Treasury could be gained from the island’s natural resources.
I will keep an eye on what comes out of Frederiksen’s meetings.
European stock markets sliding in response to Trump’s tariffs
European stock markets are now open and they’re reacting exactly as you would expect them to.
The pan-European Stoxx 600 index has fallen 1.5% at the start of trading, to its lowest level in over two months.
Germany’s DAX fell almost 2.5% at the start of tading in Frankfurt, while in Paris the CAC 40 is down 2.2% and Spain’s IBEX lost 1.5%.
You can follow all the latest business reaction here:
Norway concerned about ‘very serious’ tariffs, hopes to hold further talks with US, prime minister says
Norwegian prime minister Jonas Gahr Støre expressed alarm over “bad news” on US tariffs warning they were “very serious,” with Norway hit by a 15% levy on its goods imported to the US.
But Støre told public broadcaster NRK that “there is an opening for negotiations here, the Americans say, and we will use that in every possible way that we can,” Reuters reported.
Støre also said he would travel to Brussels on Monday to meet with senior EU officials, including European Commission president Ursula von der Leyen to discuss further steps.
UK prime minister highlights need for ‘cool and calm heads’ after Trump’s tariffs
UK prime minister Keir Starmer told business chiefs that “clearly there will be an economic impact” from Donald Trump’s tariffs, as he insisted the government would react with “cool and calm heads,” PA news agency reported.
He said “nothing is off the table” when it comes to the UK response.
Starmer said the government will now focus on making decisions “guided only by our national interest” and on “putting money in the pockets of working people,” as he stressed “one of the great strengths of this nation is our ability to keep a cool head.”
Here are some further quotes from Starmer, via PA:
“Today marks a new stage in our preparation. We have a range of levers at our disposal and we will continue our work with businesses across the country to discuss their assessment of the options.”
“Our intention remains to secure a deal, but nothing is off the table.”
“We must rise to this challenge and that is why I’ve instructed my team to move further and faster on the changes I believe will make our economy stronger and more resilient.”
“Because this Government will do everything necessary to defend the UK’s national interest, everything necessary to provide the foundation of security that working people need to get on with their lives.”
“That is how we have acted and how we will continue to act: with pragmatism, cool and calm heads, focused on our national security.”
Our political editor, Pippa Crerar, noted that Downing Street, which had been expecting a 20% rate to be imposed on the UK, expressed relief to have escaped the higher rate with lower, 10% tariffs.
Keir Starmer’s more conciliatory approach to the Trump administration appeared to have paid off, she said.
European reactions to Trump’s tariffs – round up
European Commission president Ursula von der Leyen warned of “dire consequences” for millions of people, as she said tariffs would “hurt consumers around the world.”
She said there was “no clear path through the complexity and chaos that is being created as all US trading partners are hit,” but she insisted the EU’s unity “is our strength” and the bloc would be prepared to respond with calibrated countermeasures.
Outgoing German economy minister Robert Habeck stressed the need for a united EU response, saying the bloc should leverage the fact it has the largest single market in the world.
“Europe’s strength is our strength,” he said, adding he hoped for “a negotiated solution.”
Italian prime minister Giorgia Meloni called the introduction of US tariffs “wrong” as she vowed to “do everything we can to work towards an agreement with the United States, with the aim of avoiding a trade war that would inevitably weaken the West in favor of other global players.”
“In any case, as always, we will act in the interest of Italy and its economy, also by discussing with other European partners,” she added.
Swedish prime minister Ulf Kristersson said he “deeply regreted” the US decision, saying “we don’t want growing trade barriers” as he lauded the benefits of free trade.
But he said the government was ready to respond and work with the EU to “take every opportunity to reverse these developments.”
“We want to find our way back to the path of trade and cooperation together with the US,” he stressed.
Irish prime minister Micheál Martin said that tariffs “benefit no one,” as he warned they are “bad for the world economy, they hurt people [and] businesses.”
“My priority, and that of the government, is to protect Irish jobs and the Irish economy, and we will work with our companies … to navigate the period ahead,” he said.
He said he would work with EU partners to “get on a negotiation with the US to limit the damage.”
Martin also highlighted “the added value and the strength that Ireland has given to so many US companies” based there.
Polish prime minister Donald Tusk posted a brief update on social media, saying: “Friendship means partnership. Partnership means really and truly reciprocal tariffs. Adequate decisions are needed.”
Finnish prime minister Petteri Orpo said the tariff decisions were “concerning,” as he warned “there are no winners in a trade war.”
“Businesses, consumers, and economic growth suffer. The EU is ready to respond and negotiate. We support this effort. Finland is prepared as part of the Union,” he said.
Morning opening: A broken stick
Jakub Krupa
European Commission president Ursula von der Leyen warned this morning that the global economy “will massively suffer” as a result of tariffs imposed by US president Donald Trump last night, as she said the EU was “prepared to respond.”
Despite Trump’s direct attack on “pathetic” EU as he imposed 20% tariffs on the bloc, von der Leyen still expressed hopes that the relationship could “move from confrontation to negotiation,” as she warned “there seems to be no order in disorder.”
But it wasn’t immediately obvious that there was any genuine prospect of that happening.
Instead the EU and the individual member states are now scrambling to consider how to manage the situation.
French president Emmanuel Macron has called an emergency meeting with sectors affected by Trump’s tariffs this afternoon.
German economic daily Handelsblatt published new estimates this morning that the US tariffs – including 25% on car imports – could cost German carmakers BMW, Mercedes and Volkswagen as much as €11 bn given Germany is the largest EU car exporter to the US. For perspective, it’s just under a third of the total value of German automotive exports to the US at €36.8 bn.
But the worry is not only about the immediate impact, but the more long term consequences of last night’s decision.
Addressing Europeans directly, von der Leyen said “I know that many of you feel let down by our oldest ally,” as she stressed the need to think about what’s next.
Or as Moritz Schularick, president of the Kiel Institute for the World Economy, put it to Handelsblatt:
“There is this memorable picture of a stick that you can bend and that comes back again and again. But at some point, if you bend too much, the stick breaks.
I believe that in terms of trust in the United States, something has broken down in recent weeks that will not come back so quickly.”
It’s Thursday, 3 April 2025, it’s Jakub Krupa here, and this is Europe Live.
Good morning. Fasten your seatbelts, it’s going to be a lively one.
