EU Attempts to Cool Trade War with US: Frees Up Goods Market, Tensions Persist
Progression in customs discord: EU puts forth a free trade agreement to USA - Developments in the customs disagreement: EU proposes reciprocal free trade agreement with the U.S.
The European Union (EU) is seeking a truce in the ongoing trade war with the United States. The EU's daring move: the removal of all tariffs on industrial goods. Despite the controversial tariff decisions made by US President Donald Trump, the EU is willing to negotiate, as asserted by EU Commission President Ursula von der Leyen in Brussels.
According to information from the German Press Agency, this offer was made before Trump's tariff decisions and was renewed last Friday. Von der Leyen clarified that key negotiations, particularly on free trade in cars, have been ongoing, but progress has been elusive.
Creating a Battle Plan
Von der Leyen has confirmed that the EU, alongside its efforts to negotiate with the US, is also preparing possible countermeasures in case negotiations fail. This point was also discussed by the EU's trade ministers in Luxembourg. Acting Federal Minister of Economics Robert Habeck urged caution against rash actions but stressed the importance of thorough countermeasure preparation. Habeck emphasized the importance of maintaining unity within Europe and preventing an escalation at all costs. “We must avoid sliding into a tariff war or arms race,” he stated.
Stock Market Crash
In reaction to Trump’s mammoth package of import tariffs presented last week, stock markets worldwide plummeted. The German benchmark index Dax dropped by around 10 percent at the start of trading on the first day of the new week.
The trade war has clouded the positive February balance of German exporters. “The tailwind should not deceive us,” says Dirk Jandura, President of the Federal Association of Wholesale, Foreign Trade, and Services (BGA): “The trade war has been ignited.”
A Potential Leap Backwards for Germany
Rising tariffs are particularly harmful to export-oriented countries like Germany. “If negotiations unexpectedly fail to bring any results, a recession threatens for this year,” warns Commerzbank chief economist Jörg Krämer. This would mark the third consecutive year without economic growth for Europe’s largest economy.
“Germany and the EU must quickly find their role in the new world order,” cautions BGA President Jandura. “Not only the Asian, but also the African markets offer significant potential for growth and business in the future.”
Willingness for Dialogue but Firm on Course
Trump has signaled openness to discuss trade matters with partners under specific conditions. However, his trade minister, Howard Lutnick, has asserted the US government's firm stance on high import duties on goods from virtually all countries. These challenging circumstances make a swift resolution to the trade dispute uncertain.
The US has generated a list of 185 trading partners, subject to significantly higher import tariffs. The tactics of the US government include imposing 20% tariffs on imports from European Union countries.
Trump’s objectives are twofold: to correct perceived trade imbalances and to compel manufacturing to move back to the US, with tariffs playing a central role. Revenue generated from these tariffs is expected to help finance the hefty tax cut promises made by the US administration.
A Glimpse of Hope for German Exports
From a German perspective, February brought a ray of hope, though slight, in export figures. Goods labeled "Made in Germany" amounting to €131.6 billion were shipped worldwide in February 2025, representing a 1.8 percent increase over January 2025 and a mere 0.1 percent increase compared to the previous year. When combined with January, exports remained at the previous year's level at €260.8 billion.
Most German exports in February 2025 went to the United States, with goods worth €14.2 billion being delivered to the US, reflecting an 8.5 percent increase compared to January on a calendar-adjusted basis. Imports from the US, however, decreased by 3.9 percent to €7.6 billion. Exports to EU partner countries rose by 0.5 percent to €70.2 billion within the month.
Recent sentiment surveys had raised hopes
Trump’s trade package has shattered the budding optimism within the German export industry. Just days before the announcement of these tariffs, the Ifo Institute reported growing optimism in the German export sector based on its regular surveys. The number of sectors expecting increased foreign trade had significantly increased.
Since Trump announced his tariff package, the world of trade has changed. “The global trade is undergoing a fundamental shift that will significantly impact German companies,” says Volker Treier, foreign trade chief of the German Chamber of Industry and Commerce (DIHK). According to DIHK data, 70 percent of companies expect negative impacts of US trade policy on their businesses. Any potential recovery will be "completely thwarted,” says Treier.
The EU export industry, traditionally a growth engine, appears to be in a “downward spiral” for quite some time.
[1] https://trade.ec.europa.eu/doclib/docs/2012/june/tradoc_1486090.pdf[2] https://ustr.gov/policy-issues/press-releases/2025/proclamation-adjusting-imports-steel-articles-and-aluminum-articles
- The European Union's strategy, as announced by Commission President Ursula von der Leyen, involves removing tariffs on industrial goods from EC countries, a move intended to facilitate the free movement of workers within the EU and foster negotiation with the US regarding key issues such as free trade in cars.
- Despite the renewed offer to eliminate tariffs, progress in negotiations between the EU and US has been slow, with US President Donald Trump maintaining a firm stance on high import duties on goods from virtually all countries, as affirmed by Trade Minister Howard Lutnick.
- In anticipation of possible negotiation failures and the potential escalation of the trade war between the EU and US, the EU is preparing countermeasures, urging caution and unity among its member states, as emphasized by Acting Federal Minister of Economics Robert Habeck.
