President Trump stunned the European Union over the weekend, announcing a 30% tariff on the 27-nation bloc, effective August 1. Trump had previously imposed a reciprocal tariff of 20% on the EU on April 2.
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“We had the impression that we were very close to an agreement,” said EU trade commissioner Maroš Šefčovič, adding that the new tariff rate could “practically prohibit” U.S.-EU trade.
On Monday, the EU postponed a counter-tariff plan that would affect $25 billion of U.S. goods. However, Šefčovič and other leaders within the group are now considering a new plan that would affect $84 billion of U.S. goods if trade talks fail.
EU Split on Hiking Counter-Tariff Plan
The counter-tariff plan isn’t set in stone yet, with some member countries worried that it could result in an even higher tariff level from the U.S.
“We don’t want to escalate things, then on the other hand, we also need to flash some muscles,” said Danish Foreign Minister Lars Rasmussen. Meanwhile, France is in favor of the plan while Germany is taking on a more cautious and pragmatic approach. Italy has warned that EU trade retaliation could lead to reduced U.S. military support.
The S&P 500 (SPX) is trading slightly lower today as investors digest the potential of trade disruptions between the U.S. and EU.
