Europeans have offered America a “zero on zero” trade tariff deal while hoping that global financial markets will clobber President Trump into a retreat and help to prevent full-blown tit-for-tat economic warfare.
Ursula von der Leyen, the president of the European Commission, made the zero per cent tariff offer for cars and industrial goods, after Elon Musk, a key figure in the Trump administration, called for a transatlantic free trade zone.
She said during a visit to Norway: “We stand ready to negotiate with the United States. Indeed, we have offered zero-for-zero tariffs for industrial goods, as we have successfully done with many other trading partners, because Europe is always ready for a good deal.”
European trade ministers met on Monday in Luxembourg to discuss how to respond to Trump’s blanket tariffs announced last week. So far it is a phoney trade war as stock markets hammer the US and the dollar, while the EU has stressed it has “cards up its sleeve”.
Global markets plunged further on Monday, opening a week that will be defined by a deepening global stocks rout triggered by the US president’s strategy.
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Unfolding turbulence and a potential shock to the US economy is a key part of the EU’s waiting game in the coming weeks, despite the impact on financial markets.
Maros Sefcovic, the EU’s trade commissioner, repeated the offer and said he was “ready to sit at negotiating table at any time” to avoid Trump’s tariffs estimate as hitting €380 billion of European exports.
“American partners know we are ready to engage,” he said. “While the EU remains open to and strongly prefers negotiation, we will not wait endlessly.”
The meeting of trade ministers on Monday was the first round of internal European talks on strategy to deal with Washington. The focus is on “meaningful negotiations” with the US, with action — albeit not immediate — to show EU has some clout, while the markets put pressure on Trump.
Michal Baranowski, the Polish economy minister, who chaired the talks, said that Europe would give the US “time to think through” after $5 trillion was wiped off the US stock market over two days, last Friday and Monday. “We are not going to shoot first and think later,” he said.
The EU’s line, according to diplomats, is to keep its powder dry for now to ensure that it is Trump, and not any European response to him, that gets the blame for economic fallout, especially domestically in America. “If there is a global crash, then it be Trump, not us, who will be responsible in the eyes of the public on both sides of the Atlantic,” a European diplomat said.
On Monday, in restricted and confidential talks between trade ministers, the EU was discussing how to put a shot across Trump’s bows, when to act and which American sectors to target.
Stéphane Séjourné, the French commission vice-president, threatened “withdrawing US companies from our European public markets” as a measure to hit procurement worth some €11 billion to American service companies. “We need to look at exactly which sectors and how we can do it, but it’s one of the subjects on the table,” he told the France Inter radio station on Monday morning.
The EU response will pivot on the debate over moving beyond Trump’s tariffs, which are on goods, to target services and areas such as public procurement and banking.
The EU’s traditional trade tariff retaliation would hit American exports such as Harley-Davidson motorcycles or bourbon whiskeys such as Blanton’s, but that could change in a new transatlantic trade war. On services, in contrast to goods, the US has a surplus of €109 billion in trade with Europe, meaning that American tech, procurement and banking sectors are highly vulnerable.
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Services will loom large in the EU’s sights but there is a cautious camp that wants to avoid escalation, especially with tech, a sector close to Trump. Broadly speaking, France leads the hawks while Italy, with Spain, is leading the doves contingent.
The hawks are pressing the commission to use the EU’s “big bazooka” on trade, the so-called anti-coercion instrument, to hit US tech companies and other services suppliers. Giorgia Meloni, the Italian prime minister, who is the closest of the EU’s leaders to Trump, is opposed to this, fearing it could lead to an all-out trade war.
Sefcovic said the EU would not be in the business of “tit for tat or dollar for dollar” retaliation but would consider all options, including tariffs on services.
He said: “All options are on the table and we will consult. We are prepared to use every tool in our trade defence arsenal to protect the EU.”
On Wednesday, the EU will take retaliatory measures against Trump’s metal tariffs that were announced in February and will come into force next month. The measures will target goods but are expected to move away from hitting American bourbon imports to spare repercussions: Trump has threatened levies of 200 per cent on Europe’s wine and spirits industry, and wine exporters in France and Italy are panicking about being caught in the crossfire.
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“For bourbon, I have hopes that this element is taken out of the list. We will see in the coming hours,” Séjourné said.
The French desire to protect cognac and claret exports to the US illustrates the weakness of the EU, a bloc of 27 countries, in a trade war.
Robert Habeck, the German economy minister, warned that divisions could undermine the EU negotiating strengths on services and as a major trading bloc. “The stock markets are already collapsing and the damage could become even greater,” he said, arriving for the trade talks in Luxembourg.
“It is therefore important to act clearly and decisively and prudently, which means realising that we are in a strong position. America is in a position of weakness. If every country is counted individually, and we have a problem here with red wine and there with whisky and pistachios, then it will all come to nothing.”
