The European Union will pause its first countermeasures against US tariffs, after President Donald Trump temporarily reduced the hefty tariffs he had just imposed on dozens of countries, European Commission President Ursula von der Leyen said on Thursday.
The bloc was due to impose retaliatory tariffs on about 21 billion euros of U.S. imports from next Tuesday in response to Trump's 25% tariffs on steel and aluminum. The EU is still assessing how to respond to the U.S. auto tariffs and the broader 10% levies, which remain in place.
“We want to give the negotiations a chance. While we finalise the adoption of the EU countermeasures, which have received strong support from our member states, we will put them on hold for 90 days,” Von der Leyen said on X (formerly Twitter).
Trump's decision, announced Wednesday, to suspend most of his new tariffs therefore brought relief to markets and global leaders, even as the president was escalating the trade war with China.
Furthermore, the turnaround — which occurred less than 24 hours after the new tariffs went into effect — followed the most intense episode of volatility in the financial market since the early days of the Covid-19 pandemic.
As a result, U.S. stock indexes soared on the news, and relief continued in Asian and European markets on Thursday.
Market reacts to Trump's U-turn
Before Trump’s about-face, the jitters had already wiped trillions of dollars off stock market value and caused a worrying rise in U.S. government bond yields — something that apparently caught the president’s attention.
Meanwhile, China rejected what it called threats and blackmail by Washington.
Trump kept up the pressure on China — the world's second-largest economy and the second-largest supplier of U.S. imports — with an increase in tariffs on Chinese goods to 1,25%, up from 1,04% in effect since Wednesday.
He also signed an executive order aimed at reducing China's control over the global shipping sector and revitalizing the U.S. shipping industry.
Trade war
China will “stick it out to the end” if the US insists on sticking to its own path, Commerce Ministry spokesman He Yongqian told a regular news briefing. China’s door is open to dialogue, but it should be based on mutual respect, the ministry said.
Beijing may respond again after imposing 84% tariffs on US imports on Wednesday.
Trump says the tariffs are aimed at correcting U.S. trade imbalances. He has said a trade resolution with China is also possible. But officials have said they will prioritize negotiations with other countries. Vietnam, Japan, South Korea and others are moving to try to reach a deal.
EU Pause
In Europe, euro zone bond yields jumped. Spreads narrowed. Markets reduced bets on rate cuts by the European Central Bank after Trump's latest announcement. European stocks rose.
Trump's move was seen as an important step towards stabilizing the global economy, Von der Leyen said. Shortly after, she announced that the European Union itself would suspend hiring.
However, she warned that the measures could be reintroduced.
“If the negotiations are not satisfactory, our countermeasures will come into force. Preparatory work for further countermeasures continues,” she said. She then added: “As I have said before, all options remain on the table.”
On the other hand, Trump’s reversal of tariffs imposed on other countries is not absolute either. According to the White House, a blanket tariff of 10% on nearly all US imports will remain in place. Furthermore, the announcement does not appear to affect tariffs on autos, steel and aluminum that are already in place.
It is worth noting that the US tariff break also does not apply to duties paid by Canada and Mexico. Products from these countries therefore continue to be subject to tariffs of 25%. These tariffs, according to authorities, are linked to the fight against fentanyl. In this context, they apply if the products do not comply with the rules of origin of the trade agreement between the US, Mexico and Canada.
Source: John Geddie and Ingrid Melander | Notícias Agrícolas
