EU Prepares for Trade Retaliation if Negotiation with US Fails

The European Union is taking formal steps to challenge the United States over its tariff policies, announcing Thursday that it will file a case with the World Trade Organization. The dispute centers around the US’s imposition of tariffs on cars and car parts from the EU, which Brussels sees as a “clear violation of international trade rules.”

According to a statement from the European Commission, the bloc will initiate the process by formally requesting consultations with the US through the WTO’s dispute settlement mechanism.

The Commission claims that US tariffs have breached WTO rules, vowing to “reinstate” the legitimacy of multilateral trade agreements.

“It is the unequivocal view of the EU that these [US] tariffs blatantly violate fundamental WTO rules,” the Commission stated. “The EU’s objective is thus to reaffirm that internationally agreed rules matter, and these cannot be unilaterally disregarded by any WTO member, including the US.”

Tariff dispute escalates, EU prepares countermeasures

The Trump administration has threatened a 20% reciprocal tariff on all imports from the EU and implemented a 25% tariff on all imported vehicles, directly affecting European automakers.

European Trade Commissioner Maros Sefcovic said at a press conference Wednesday that the EU could negotiate for a resolution, but it is preparing for “any scenario.”

In parallel with the WTO filing, the Commission has opened a public consultation on a list of US products that could be hit with countermeasures if talks fail. The targeted goods span industrial and agricultural sectors and are valued at €95 billion ($107.4 billion).

The bloc drew up a 200-page list of more than 4,800 US products that could face tariffs, including passenger cars, medical devices, chemicals, plastics, and agricultural products. Bourbon and other American spirits have also reappeared on the list, reportedly after pressure from France and Italy, which had earlier lobbied to exclude them to avoid provoking a stronger response from Trump on their own wine exports.

According to Eurostat data, European bloc imports of the targeted goods totaled over €109 billion ($123 billion) in 2024. Among them, aircraft accounted for the largest share at more than €13 billion, followed by automobiles at €7 billion.

In addition to retaliatory tariffs, it is weighing restrictions on exports of scrap steel and certain chemical products to the US, which could affect roughly €4.4 billion ($5 billion) in trade.

As reported in late April by Cryptopolitan, the union temporarily suspended some of its retaliatory measures introduced earlier in April to give diplomatic efforts a chance. That package targets €21 billion ($24.1 billion) worth of US goods with potential 25% tariffs, affecting sectors like agriculture and textiles.

Commission President Ursula von der Leyen reiterated that the bloc prefers diplomacy. “The EU is ready to find negotiated outcomes with the US. We believe there are good deals to be made for the benefit of consumers and businesses on both sides of the Atlantic,” von der Leyen said in a Thursday statement.

EU eases car emission rules to boost domestic industry

The European bloc approved an initiative this week that involves loosening emissions regulations to give carmakers flexibility in meeting carbon targets.

Under a scheme proposed in March by Commission President von der Leyen, manufacturers will now be able to average vehicle emissions over a three-year period from 2025 to 2027. Previously, companies faced fines if they missed the emissions target in any single year. The change was approved in Strasbourg with a majority of 458 to 101 votes.

The European Automobile Manufacturers’ Association (ACEA) said the reform was a “much-needed flexibility” in meeting CO2 targets in their transition toward zero-emission mobility.

“This is incomprehensible. It is yet another step back in the fight against climate change,” said Bricmont, who represents Belgium.

Source: CryptoSlate

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Source: investors

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Source : fxempire

Investors grappling with uncertainty over the economic fallout from President Donald Trump's tariffs are facing the likelihood that the chaotic trade backdrop means the path of monetary policy remains up in the air.

The Federal Reserve kept rates steady on Wednesday, as expected, and said the risks of both higher inflation and unemployment had risen, leaving the U.S. central bank in no hurry to take any interest-rate actions for the foreseeable future and rendering the "appropriate response for monetary policy" unclear.A slowdown has yet to emerge in economic data, but investors are bracing for potential damage from the Trump administration's sweeping tariffs, while the trade backdrop remains in flux as the White House negotiates with trading partners. That is leading some investors to be more cautious, focusing on inflation-protected assets and shares of companies that stand a better chance of weathering a downturn.

With the central bank on the sidelines for now, investors said asset prices were primed to be even more sensitive to important economic data and trade developments as market participants parse them for clues about the Fed's likely next move.

"There's nothing investors like less than uncertainty and the Fed isn't in a position to offer them certainty," said Josh Jamner, senior investment strategy analyst at ClearBridge Investments.

In a press conference following the U.S. central bank's monetary policy decision, Fed Chair Jerome Powell said trade policy remains a source of uncertainty that affirms the Fed's need to maintain a wait-and-see approach.

"Powell is like every other investor: just waiting to see how this plays out," said Robert Christian, head of Absolute Return Portfolio Management at Franklin Templeton Investment Solutions.

After cutting rates by a total of one percentage point last year, the Fed has held its benchmark rate at 4.25% to 4.5% so far in 2025, but investors broadly have been expecting more easing to come this year.

Market expectations following Wednesday's meeting were similar to where they stood prior to the decision, with Fed fund futures indicating an expectation of about three 25-basis-point reductions by December, with the July meeting tipped as the likely next cut.

The projected further easing stems from the expectation that the hit to economic growth will outweigh any push higher in inflation, said Marta Norton, chief investment strategist at retirement and wealth services provider Empower.

While Norton called that her "base case," she added, "I do think we have to allow for a wider range of possibilities, particularly the idea that inflation could surprise to the upside."

Ed Al-Hussainy, senior rates strategist at Columbia Threadneedle Investments, said it was more likely that the Fed would not act until at least its September meeting.

"It would take some dramatic deterioration for the Fed to start moving before September," Al-Hussainy said. "And then by September, we'll have a little bit of a better sense of at least the direction of travel."

Indeed, traders pared back on the amount of easing expected this year, as well as discounting the chances of a cut in June, following last Friday's strong U.S. employment report. Data showed payrolls rose by a higher-than-expected 177,000 jobs last month.

On top of the lack of clarity about trade and monetary policy, there is uncertainty about fiscal policy, including how the federal budget process will shake out, said Jeffrey Palma, head of multi-asset solutions at Cohen & Steers.

"All of those suggest that market volatility stays somewhat elevated going forward," Palma said.

Markets largely took the Fed's announcement in stride. The S&P 500 (.SPX), ended up 0.4% following the meeting, with shares of chipmakers rallying after a report that the Trump administration plans to rescind artificial intelligence chip curbs. The 10-year Treasury yield was at 4.27% late on Wednesday, slightly lower on the day.

The Cboe market volatility index (.VIX), an options-based gauge of investor anxiety, edged lower but at 23.55 was still above its long-term median level of 17.6.

SAFER INVESTMENTS SOUGHT

Palma said his firm is recommending broader diversification of portfolios, with exposure to "real assets" such as real estate, infrastructure and natural resources that can buffer against an inflationary backdrop.

Given the uncertain risk/reward situation, ClearBridge's Jamner said investors would be better served by shifting into shares of companies that either have the flexibility to adjust to changing economic environments or have competitive advantages that insulate them from economic vagaries.

Financial advisers – many of whom have been working on rebalancing and cutting risk from client portfolios for several months now – said the lack of precise responses or detailed forecasts by Powell was exactly what they had anticipated.

Following the meeting, Rafia Hasan, chief investment officer of Perigon Wealth Management, said she was turning her focus to potential trade deals.

“That is what has the most potential to have a real impact on the markets,” she said.

Source: Kitco

Source: Bloomberg