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Expert Warns of Trade War if EU Doesn’t Retaliate to Trump’s Proposed Tariffs

A trade war is looming between the US and the EU, and the EU must stand firm and retaliate against potential tariffs from the United States, according to Jacob Funk Kirkegaard, a senior researcher at the Peterson Institute for International Economics. Kirkegaard believes that the markets are underestimating the seriousness of Donald Trump’s recent recommendation of a 50 percent tariff on EU goods, calling their reaction “terribly naive.”

Trump suggested imposing a 50 percent tariff on EU goods starting June 1, 2025, following what he perceived as unfruitful trade discussions. This proposal came after a meeting between US and EU trade representatives apparently failed to yield progress from the American perspective.

Kirkegaard suggests that the EU should not panic but must be prepared to respond with retaliatory tariffs if the US moves forward with the proposed tariffs. He argues that failing to retaliate would be unacceptable and that the EU should not seek a special agreement like the one the UK accepted.

He predicts that the US economy will ultimately be under more pressure than the EU in a trade war scenario. He points out that the US is already engaged in trade disputes with a significant portion of the global economy, making it difficult for them to win.

Maros Sefcovic, the EU’s trade commissioner, has stated that the EU is willing to negotiate but is also prepared to defend its interests. Kirkegaard interprets this as confirmation that the recent meeting between trade representatives was unproductive.

While the US currently has a 10 percent tariff in place, a planned 20 percent punitive tariff on EU goods has been postponed until July during ongoing negotiations. Trump’s recommendation seeks to scrap these negotiations and escalate the situation with the 50 percent tariff.

Kirkegaard emphasizes that the EU must retaliate because dealing with a “bully” requires a firm response. He dismisses the moderate market reactions to Trump’s announcement as naive, stating that many investors are underestimating the potential for a full-blown trade war.