Trade war fears linger even as EU mounts pressure on Washington

Though a diplomatic intervention by the Congress had earlier alleviated the threat of a full-fledged trade war, the response of European countries to President Trump’s move to impose tariffs on steel and aluminum imports signals the global trade scene could be heading for a significant change.

Apparently, the import tariffs did not go down well with the European Union. The general perception in the region is that the new regulation would jeopardize the economic health of both the economies.

While the initial response from Europe was of retaliation when Trump reaffirmed his stance, Germany seems to be hopeful of reaching a truce with Washington on the issue.

Meanwhile, sensing the dangers of a one-sided levy on imports, the EU heads have begun a process to identify American products that could be brought under a new tax system. The move, which could be seen as the beginning of a trade stand-off between the two continents, would put Washington on the defensive.

The efforts by Chancellor Angela Merkel to explore the possibility of a diplomatic solution gathered momentum when Germany’s economy minister

left for the U.S. the other day to hold talks with his counterparts there on re-establishing ‘free trade.’ The growing clout of German products in the local market has been a cause of concern for Trump, whose first target is China.

Germany seems to be hopeful of reaching a truce with Washington on the issue

While Germany and China are unlikely allies on the economic front, Merkel’s gesture to the Asian county for strengthening bilateral ties could put more pressure on Washington to ease the terms of its new import regulation, which is a pre-condition for Altmaier’s talks to bear fruit.

Though the German government and the European Commission have taken different routes for resolving the tariff crisis, their underlying goal is to have Europe exempted from the import tariffs proposed by Trump — 25% on steel and 10% on aluminum.

So, what happens if the attempts to have the names of European Union countries removed from Washington’s tariff list failed? In such a scenario, the Commission would retaliate by imposing duties of up to 25% on products imported from the U.S. A tit-for-tat policy of that sort could mark the beginning of the much-feared trade war.