The $100 Football: Now with 80% Inflation, 20% Air

The European Union is navigating escalating trade tensions following new U.S. tariffs introduced under President Trump. These include a 20% "Liberation Day" tariff on most EU goods, as well as levies on steel, aluminum, and cars. In response, the EU initially approved retaliatory tariffs on American goods like yachts and poultry but has paused implementation to prioritize negotiations.

The EU seeks a "zero-for-zero" tariff agreement but remains prepared to defend its interests using tools like the Anti-Coercion Instrument. Despite a preference for dialogue, it is bracing for more U.S. actions, including investigations into pharmaceuticals and semiconductors.

The ripple effects are global. Japan has voiced concerns, China has retaliated against its own tariff hikes, and Hong Kong suspended U.S. postal services. The WTO downgraded its 2025 trade growth forecast, warning of a broader slump. President Trump’s “reciprocal tariffs” policy—setting a baseline 10% rate for most countries (excluding suspended special rates until July 9) and higher for nations like China—is reshaping global trade. The EU has paused countermeasures for 90 days but is prepared to reactivate them if negotiations collapse.