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The US and Europe are locked in a standoff over tariffs

If the two can’t figure out a solution, a trade war could be on the horizon.

Trump and Europe are locked in a standoff over steel and aluminum tariffs
Trump and Europe are locked in a standoff over steel and aluminum tariffs
LightRocket via Getty Images

President Donald Trump’s continued threats to impose sweeping steel and aluminum tariffs on the European Union has infuriated the bloc and prompted it to warn that it won’t be pushed around by the president’s unorthodox pressure tactics.

On Monday night, the Trump administration announced that it is giving Europe 30 days to strike a deal with the US that would limit the amount of steel and aluminum it exports to the US. If no deal is struck, the US will initiate a 10 percent tariff on Europe’s aluminum exports and a 25 percent tariff on its steel exports to the US.

The announcement was a last-minute extension of a deadline that had originally been set for May 1. Technically, it gives the US and Europe more breathing room to strike a deal. And it delays what could be a costly confrontation: If the US imposes tariffs on European metals, Europe has threatened to retaliate with tariffs on US goods like blue jeans and motorcycles.

But the brief extension given to Europe stands in contrast to the progress the US is making with other close trading partners that it had threatened with steel and aluminum tariffs as well. In the same announcement, the Trump administration said it had come to agreements in principle with Australia, Brazil, and Argentina on limiting steel and aluminum exports to the US. And the White House said that the US had struck a final agreement with South Korea that will permanently exempt it from the tariffs.

After the US announced the 30-day extension, Europe slammed the US for continuing to interfere with global trade routes and declared that it expects to be exempt from future tariffs.

“The US decision prolongs market uncertainty, which is already affecting business decisions. The EU should be fully and permanently exempted from these measures,” the European Commission said in a statement on Tuesday.

Europe said it was still committed to talks on coming to some kind of agreement, but also pushed back against the Trump administration’s pressure tactics.

“[The EU] has also made clear that, as a longstanding partner and friend of the US, we will not negotiate under threat,” the European Commission said.

The US and Europe have until June 1 to figure out a solution to this impasse. If no agreement is struck, the Trump administration could technically postpone the tariffs once more.

But it could also choose to go ahead and unleash them. In which case Europe is likely to strike back hard — and hit Trump where it hurts.

Europe knows how to hurt Republicans with its tariffs

Europe has threatened to retaliate against the US if the Trump administration does in fact impose steel and aluminum tariffs on European exports.

Back in March after Trump made his first announcement on the tariffs, European Commission President Jean-Claude Juncker threatened to put tariffs on goods like blue jeans, bourbon, and Harley-Davidson motorcycles in response to Trump’s move. That could decrease demand for those products and lead to US workers losing their jobs.

Europe has chosen its potential targets strategically. Bourbon is made in Senate Majority Leader Mitch McConnell’s home state of Kentucky; Harley-Davidsons are manufactured in House Speaker Paul Ryan’s home state of Wisconsin.

Orange juice from Florida is also another target for the Europeans. An uptick in unemployment in the key battleground state could deal a blow to the GOP’s chances there in the 2018 and 2020 elections.

The EU isn’t alone in getting a 30-day deadline on steel and aluminum tariffs. The Trump administration also gave Canada and Mexico an exemption on tariffs that ends on July 1. But the implications are different for them, as they’re currently in talks with the US to renegotiate NAFTA. The Trump administration sees the temporary exemption as a bargaining chip in talks over what the new deal will look like. While Canada and Mexico aren’t happy about that tactic, it’s likely that Trump will keep extending the exemption until NAFTA talks come to a conclusion.

The big issue at the moment is the standoff with Europe. Trump tweeted in March that if the European Union does in fact issue retaliatory tariffs, then he will retaliate against their retaliation, by slapping tariffs on European cars. If that happened, it’s possible Europe would once again try to even the score. The cycle could continue indefinitely and spiral into a trade war.