Europe could retaliate with tariffs that affect U.S. financial services and tech companies, UB professor says

BUFFALO, N.Y. – The European Union has a few options in how they respond to the United States 20% blanket tariffs, according to a University at Buffalo expert on European politics.

Timothy Hellwig, PhD, is a professor of political science at the UB College of Arts and Sciences. He says that European countries may try to negotiate first, before applying their own tariffs that could impact the U.S. financial service and tech companies.

“I think that European countries, separately or jointly through the European Commission, will first attempt to negotiate with the U.S. Trade Representative to draw down the tariffs,” said Hellwig. “Europe generally prefers negotiation rather than quick reciprocal counter measures – this is due in large part because not all countries are able to retaliate with equal velocity.”

The U.S. president has basically unilateral power to apply and rescind tariffs, but the same is not true for many European countries and is certainly not the case when decisions must be negotiated among the 27 member states of the EU. This difference in how fast policy levers can be applied, Hellwig says, is one thing that perhaps not all people consider.

“However, reality is quickly setting in – more quickly because Trump now has a track record of resisting negotiation. Macron of France has proved to be able to sway Trump’s positions sometimes on NATO and Ukraine. But Trump seems locked in on tariffs. So, I expect the EU to impose reciprocal tariffs,” Hellwig says.

A final point of nuance, Hellwig says, is to look at the trade balances. The U.S. runs a trade deficit in goods with Europe, meaning that more goods come from Europe to the U.S. than vice-versa.

“This will hurt European auto producers, for instance,” says Hellwig. “It also means that simply slapping an equal tariff on auto imports may not sufficiently punish the U.S. and lead to policy re-liberalization. But Europe has a services deficit with the U.S. So European retaliation could hit financial service companies and tech companies like Google an Apple that rely on European consumers.”