Washington: The EU trade chief is on a business trip in Washington to talk with his U.S. counterpart in hopes of averting a tariff war with the United States. Maros Sefcovic, the European Commission’s Commissioner for Trade and Economic Security, is spearheading the European Union’s efforts to deescalate trade tensions with the U.S., centered around the EU’s trade deficit with the United States.

According to Namibia Press Agency, the U.S. administration’s announcement on February 10 to impose a 25-percent tariff on steel and aluminum imports, alongside proposed “reciprocal” trade policies, has prompted a swift response from the EU. The European Commission expressed concern, viewing these policies as a step backward, which could significantly impact the EU’s economy and exports.

The potential loss of up to 3.7 million tonnes of steel exports to the U.S. is a significant threat to EU steel producers, as stated by the European Steel Association. The EU’s manufacturing industry faces additional pressure as many steel plants struggle with rising costs and diminished demand.

Bert Colijn, an economist at ING, warns that the proposed tariffs could lead to a prolonged downturn in European industry. The focus on “reciprocal tariffs” also threatens the EU auto industry, particularly Germany, which already faces economic challenges with a revised growth forecast for 2025.

French industries, including automotive and pharmaceuticals, are also at risk. The French economy, grappling with high public debt, could see reduced exports due to U.S. tariffs. Meanwhile, the European Central Bank (ECB) is closely monitoring the situation, as trade wars may disrupt its monetary policies.

Negotiations are underway, with EU trade ministers reaching a consensus to prioritize dialogue to prevent a tariff war. Maros Sefcovic emphasized the EU’s willingness to discuss solutions, addressing various trade issues at the Munich Security Conference. The EU is considering measures such as expanding LNG imports from the U.S. and reducing tariffs on U.S. cars.

In anticipation of potential U.S. tariffs, the EU has been proactive, securing a free trade agreement with MERCOSUR and strengthening ties with Canada to mitigate uncertainties. Ursula von der Leyen, European Commission President, has vowed to protect EU economic interests if U.S. tariffs are enacted.

The EU is prepared to implement countermeasures, including targeting U.S. products like motorcycles and whiskey, and may employ stricter import restrictions on agricultural products. Additionally, the EU’s Anti-Coercion Instrument provides a framework for retaliatory actions against economic coercion.

While the U.S. experiences a trade deficit with the EU in goods, it maintains a surplus in services trade. The EU could impose regulatory measures on American tech companies and potentially revive the “digital services tax” to further counterbalance U.S. tariffs.