Europe’s Turn: Retaliation Takes Trade Tensions to the Next Level

The European Union’s retaliatory tariffs on U.S. products came into force on Friday, the latest shots fired in what increasingly looks like a global trade war.

The EU, the world’s largest trading bloc, imposed levies on 2.8 billion euros ($3.3 billion) of American products in response to U.S. duties on its steel and aluminum exports that were justified on national security grounds.

“We did everything we could to avoid this situation, but now we have no choice but to respond,’’ said EU Trade Commissioner Cecilia Malmstrom. “It is frankly ridiculous that EU steel is considered a threat to U.S. national security. As longstanding allies of the U.S., we were disappointed, but not surprised.’’

The European reaction opens up another front in Washington’s battle to reshape its commercial relationship with the world. President Donald Trump has levies on $250 billion of Chinese goods in the pipeline and already placed duties on products from allies including Canada, Mexico and Japan.

The economic risks of tit-for-tat tariffs imposed by the world’s main trading blocs have created divisions among White House officials, with one faction seeking talks with China to take the heat out of the situation. Another group is determined to punish China, and the president himself, who was forced to reverse a high-profile immigration policy this week, has shown no signs of backing down.

Risk sentiment benefited from signs that Washington may be seeking to calm tensions with China. European stocks rose, along with U.S. futures, while declines in Japanese and Hong Kong equities were offset by advances in their Chinese and Korean counterparts.

Read more at Bloomberg.