Divided EU scrambles for a response to Trump’s tariffs

Good morning. News to start: Nato’s European members must agree a “joint road map [and] timetable” with the US to shift the burden of defending the continent, Finland’s defence minister told the Financial Times, to avert a unilateral withdrawal by the Trump administration that Russia could exploit.

Below, I have more from the minister on how to sidestep Hungary’s pro-Russian spoiler tactics. But before that, our trade maestro explains Brussels’ stuttering response to Donald Trump’s tariff onslaught.

Have a liberating weekend.

Delayed reaction

The US has whacked the EU three times with tariffs in the space of a month. Yet Brussels’ first response is still being thrashed out by nervous member states, writes Andy Bounds.

Context: US President Donald Trump levied tariffs of 20 per cent on almost all EU exports on Wednesday. That is on top of 25 per cent of sectoral levies on steel, aluminium and cars.

The European Commission has said it would retaliate on up to €26mn worth of US goods for the tariffs on steel and aluminium. But the US is hitting €350mn plus of EU products — and Brussels has yet to come up with a response for the rest of them.

France, Italy and Ireland want bourbon whiskey taken off the steel retaliatory list, on the grounds that Trump threatened to escalate with 200 per cent levies on wine and other alcohol.

Antonio Tajani, Italy’s foreign minister, met EU trade commissioner Maroš Šefčovič yesterday to plead his case. “Putting a sanction on whiskey means provoking a reaction on the alcohol that we export, wines in particular. And since we export much more alcohol than we import, it would be a form of self-harm,” Tajani said.

He also wanted motorbikes taken off the list, fearing for Moto Guzzi and Ducati, as well as jewellery, precious stones and another 30 products.

Tajani instead wants talks to eliminate all tariffs between the two sides. Šefčovič will have an online call with his American counterpart tomorrow, but talks have so far yielded no progress.

One issue is that Howard Lutnick, the US commerce secretary he talks to, appears to have little sway with Trump. Peter Navarro, Trump’s trade adviser, called the shots, said one EU diplomat.

“It seems that Peter Navarro is the architect of these policies. But he will not be the one to negotiate,” said the diplomat.

European Commission president Ursula von der Leyen yesterday promised the EU was preparing to respond to the tariffs in kind, but she was “ready to negotiate to remove any remaining barriers to transatlantic trade”. Officials however insist the conversation must be two-way, with Washington dropping some of its non-tariff barriers.

The EU will send its revised list of retaliation measures to member states on Monday, with a vote planned for next week. The tariffs would then be passed into law on April 15, but only apply a month later.

Stéphane Séjourné, the EU’s industry commissioner, said he would meet industry leaders on April 10 to take the temperature.

“The objective will be to assess the consequences for the sectors, discuss the format of the countermeasures and the means of supporting our companies,” his office said.

Chart du jour: Flying away

Another effect of the Trump tariffs: The cost of air freight to the US immediately surged, as businesses rushed to import products before the measures hit.

Bypassing Budapest

Brussels must be legally “innovative” to prevent Hungary from blocking support to Ukraine or easing pressure on Russia, Finland’s defence minister has said.

Context: Hungary, the EU’s most pro-Russian member state, has repeatedly delayed or weakened sanctions against Moscow and vetoed military support for Kyiv. It has also threatened to release some €190bn of frozen Russian state assets in July, when the sanctions immobilising them come up for renewal.

“All the [EU] nations are stepping forward with their own national budgets [to support Ukraine]. There are good signs. But Hungary is a problem,” Antti Häkkänen told the FT. “The European Commission has to find a legal and financial instruments for that.”

“I know the European Commission’s lawyers, they can be really innovative. So now is the time to use all the ideas,” he added. “How to find different kinds of funds, back ups for loans or something like that, that we can continue even stronger Ukrainian support.”

Häkkänen’s fears are shared by many EU capitals worried about Hungary blocking the sanctions extension — which requires unanimity — or preventing new financial support packages for Kyiv from being agreed.

“If there’s a bad peace [in Ukraine] and the sanctions are being lifted off too quickly, Russia will get the energy incomes and re-arm themselves faster,” Häkkänen said. “And that’s a problem for the whole of Europe . . . what we have to now use is EU funding to aid Ukraine’s military.”

What to watch today

1. European Commission president Ursula von der Leyen and EU Council president António Costa attend the EU-Central Asia summit in Samarkand.

Now read these