FT: Germany and France push EU toward trade war with Washington

Germany and France are pressing the European Union to prepare trade retaliation against the United States if negotiations on a new deal fail before the August 1 deadline, signalling a hardened stance as Donald Trump threatens steep new tariffs, according to the latest report by the Financial Times.

Berlin, once committed to negotiating with the Trump administration to ease US-imposed export barriers, is now calling for a strong response. It has aligned with Paris, which has long advocated leveraging retaliatory duties to pressure Washington.

Chancellor Friedrich Merz is hosting French President Emmanuel Macron in Berlin today, July 23. Ahead of that meeting, French Industry Minister Marc Ferracci stressed the need for a tougher approach: “We need to change our negotiation method. We need to be able to retaliate and put on the table any option that would change the balance of the negotiation,” he said at a joint event with German counterpart Katherina Reiche.

On July 22, senior European Commission officials held closed-door “confessionals” with EU ambassadors to gauge support for activating the bloc’s anti-coercion instrument (ACI). This unused mechanism—dubbed the EU’s "trade bazooka"—would allow Brussels to bar US firms from public tenders, suspend intellectual property protections, and restrict transatlantic trade flows.

While Germany and France support invoking the ACI, several EU member states remain wary of provoking Trump. “There is a silent majority against triggering the ACI,” said one EU diplomat. Another added: “That would be nuclear. The situation is too fluid to gauge with any degree of certainty if member states favour it.”

The Commission will only proceed if it secures a qualified majority among member states. Still, Trump’s recent letter—threatening to hike reciprocal tariffs to 30 per cent from August 1—has stiffened EU resolve. Previously, tariffs had been scheduled to rise from 10 to 20 per cent.

“The letter has hardened the mood among member states,” a diplomat noted. “Germany has turned 180 degrees in a few days,” said another, adding that most capitals now want to “put something on the table” to gain leverage.

Triggering the ACI would not impose immediate measures but would initiate an investigation. If the Commission finds coercion by the US, it would propose retaliatory steps for member state approval. “It’s a calibrated response,” a diplomat explained. “It can be a bazooka, but it can also be a sniper rifle.”

Talks remain fragile. Trump recently rejected a framework deal that would have capped reciprocal tariffs at the current 10 per cent, instead demanding a permanent floor of 15 per cent or higher. The EU is also seeking carve-outs from a 25 per cent sectoral tariff on cars and auto parts, and a 50 per cent levy on steel and aluminium.

US Treasury Secretary Scott Bessent told Fox News on Tuesday that August 1 was a firm deadline, after which tariffs would “boomerang back to the reciprocal level.”

If talks break down, EU diplomats say Brussels is ready to impose an already-approved retaliatory package targeting €21 billion in US exports—such as chicken and jeans—on August 6. A second wave of tariffs, covering €72 billion in goods including Boeing aircraft and bourbon, will be voted on by the same date and could take effect immediately after approval.

Diplomats emphasise these measures would be a last resort. “Of course, they also hurt EU companies, and no one wants to see a downward spiral of transatlantic trade,” one said.

The Commission is also drafting a third package of countermeasures targeting US services, potentially including levies on digital services and online advertising revenues.

Olof Gill, spokesperson for the Commission’s trade office, said no countermeasures will be enacted before August 1. “Until then, our laser focus is on negotiations, and that will be our priority for the moment,” he stated.

By Tamilla Hasanova