Trump tariffs: What just happened ― and what’s Europe’s gameplan?

 

Trump tariffs: What just happened ― and what’s Europe’s gameplan?

 

It was a week when penguins, bonds, the new German coalition, Louisiana soybeans, fossil fuels, the EU’s Digital Markets Act, France’s creaking politics and American bourbon all became one news story. POLITICO explains what got us all yippy.

 

April 11, 2025 4:42 am CET

By Seb Starcevic, Jakob Weizman, Francesca Micheletti, Carlo Martuscelli and Andrew McDonald

https://www.politico.eu/article/trump-tariffs-whats-his-next-move-%e2%80%95-and-europes-gameplan/

 

BRUSSELS ― Crashing markets, tariffs on penguins, recession forecasts and the backflip to end all backflips.

 

After a breathlessly chaotic week, U.S. President Donald Trump called a temporary truce in his global trade war. We hope you kept up.

 

While much of the world (apart from tariff-battered China, of course) breathed a sigh of relief after Trump hit pause on his most severe economy-shaking levies, it is watching keenly to see if the president remains true to his word.

 

So if you didn't keep up, here’s how Trump’s tariff U-turn played out, what it meant, why it happened ― and what, crucially, will happen next. (PS: That's anyone's guess, quite frankly.)

 

So what was that all about?

In an abrupt about-face Wednesday, Trump announced a temporary cease-fire in his trade war, with so-called reciprocal tariffs on all countries except China paused for 90 days.

 

The U-turn came after widespread market chaos and diplomatic protests from Berlin to Beijing over his plans to impose punishing worldwide tariffs, ranging from 10 percent to as high as 50 percent.

 

Though he did not explicitly admit that the financial fallout had prompted him to reverse course, Trump acknowledged Wednesday that the markets had looked "pretty glum” and that people were “getting a little bit yippy.”

 

While he has backed off on most of his planned tariffs for the time being, Trump said in a post on Truth Social that he would retain 10 percent baseline tariffs on countries across the board — which is still higher than almost any tariff regime ever.

 

Bang go the markets

The money people didn’t take Trump’s initial tariff imposition well, to put it mildly.

 

As the week went on, the S&P 500 index, which tracks the performance of 500 of the largest U.S. publicly traded companies, fell nearly 13 percent. That wiped trillions of dollars off the market value and sent the stock price of iconic brands like Apple and Meta (more on them later in a different context, funnily enough) plummeting.

 

Investment bank CEOs began to sound the alarm about an incoming recession, and panic spread at exchanges from London to Paris to Tokyo, which all plunged deep into the red.

 

In the end, though, it was not stocks but U.S. government bonds — the tradeable “I owe you” notes that America uses to finance itself — that changed Trump’s mind.

 

“I was watching the bond market,” Trump said. “The bond market is very tricky. I was watching it. But if you look at it now, it’s beautiful.”

 

Usually, when stocks go down, the price of government bonds rises. That’s because they’re considered a safe investment in times of market turmoil. But sometimes, when things are really bad (we'll put it in caps, like a Trump social media post: REALLY BAD), both stocks and bonds sell off at the same time. It happened at the height of Covid, and it happened again in this situation.

 

A meltdown in the $29 trillion U.S. government debt market would have risked a catastrophic financial crisis. It was bonds, after all, that defeated short-lived U.K. Prime Minister Liz Truss, and it was bonds that made Trump sound the retreat.

 

The EU strikes back ― or does it?

After Trump’s “Liberation Day," European Commission President Ursula von der Leyen reminded Trump that Brussels was “already finalizing a first package of countermeasures in response to tariffs on steel.”

 

On April 7, Commission trade chief Maroš Šefčovič met EU ministers in Luxembourg to discuss the draft list of countermeasures. He emphasized that the bloc’s response was “very gradual, just reacting to steel and aluminum.”

 

With the benefit of hindsight, that looks like a good call.

 

“What's important here is that Europe reacts in a calm and measured way," Irish Foreign Minister Simon Harris said at the meeting. "Time is somewhat on our side. We've got to actually take this step by step. And that's what we're going to do."

 

Two days later, EU member countries voted almost unanimously to approve retaliatory tariffs on what amounted to almost €21 billion of U.S. exports to Europe, including politically sensitive products like Louisiana-made soybeans.

 

Is it all about China?

In the same Truth Social post where he announced he was tapping the brakes on global tariffs, Trump also said he would raise already crushingly high penalties on China to 125 percent, accusing them of “ripping off the U.S.A.”

 

By offering a reprieve to the rest of the world while putting the screws to Beijing, Trump appears to have been setting the stage for a more targeted trade war, one that pits the world’s two largest economies against each other.

 

Part of Trump’s rationale for easing up on his threatened tariffs was that most countries did not hit back. An exception was China, which had earlier retaliated with tariffs of 84 percent on American goods, a response Trump called disrespectful.

 

But hours before he backtracked, the EU, which was slugged with a 20 percent tariff on its products, also returned fire by approving retaliatory tariffs ― but only on steel and aluminum.

 

When an Oval Office pool reporter pressed Trump about the EU’s tariffs on Wednesday, he appeared surprised to learn about the payback, ominously calling it “bad timing.” Commerce Secretary Howard Lutnick jumped in quickly to add that the EU had not yet pulled the trigger on its tariffs, which seemed to mollify Trump.

 

So there's still some confusion over whether the president will ultimately decide to go easier on Brussels.

 

Von der Leyen and the Commission confirmed on Thursday that the EU’s countermeasures will also be put on hold for 90 days — giving both sides of the Atlantic ample time to negotiate.

 

And then there's energy

On Tuesday, Trump called on the EU to spend an additional $350 billion on American fossil fuels to address the imbalance in transatlantic trade — equivalent to more than the entire annual U.S. oil output at current rates.

 

European diplomats and officials have made repeated trips to Washington in recent months, looking to take the White House up on the offer by agreeing to buy more gas to avert a trade war. Officials involved in the talks told POLITICO that they had been left frustrated by the administration’s apparent disinterest in actually agreeing a deal.

 

In an interview last week, Czech Foreign Minister Jan Lipavský said Trump’s team had “political” reasons to want to impose tariffs, and that “negotiation[s] before 'Liberation Day' [were] not able to change it.” Now, given a 90-day reprieve from Trump's formidable trade barriers, the bloc is doubling down on efforts to secure an agreement to buy more gas.

 

It has an impact on the EU's other work

The trade conflict has cut across other critical policy areas.

 

The European Commission is delaying decisions to fine American tech giants under its digital antitrust rules, which has prompted speculation that the EU executive is holding fire in a bid to navigate trade tensions.

 

Penalties against Apple and Meta, which owns Facebook and Whatsapp, would have been certain to trigger a major backlash from the U.S. administration and its allies in Congress.

 

Brussels had been expected to issue decisions in three year-long investigations into breaches of the bloc’s signature Digital Markets Act as soon as the end of March, a deadline that EU competition chief Teresa Ribera said she was committed to early this year.

 

That has now passed and fines haven’t yet been imposed.

 

A merci from Paris

Would a thank-you note to Donald Trump show weakness, Europe wonders? 

 

If not, French President Emmanuel Macron should consider sending one to his “good friend” at 1600 Pennsylvania Avenue. France can ill afford a trade war as it confronts a maelstrom of crises that have exposed fundamental cracks in the 66-year-old Fifth Republic ― the name for the country's current system of government.

 

But the chaos at home doesn't mean that Macron, who has never been afraid to take a high-stakes gamble, isn’t ready to fight fire with fire. As one of the loudest voices in Europe pushing for a united and more muscular response to trade threats, meekly returning to Washington wouldn't have been the French president's M.O.

 

In the hours that followed “Liberation Day,” Macron gathered stakeholders at the Elysée Palace to discuss the situation and then publicly called on all companies within the EU to stop investing in the U.S. “until we have clarified things.”

 

Even with some of the tariffs now delayed, Macron is likely to continue preaching the gospel of unity in Brussels as his government works to shape a deal more to France’s liking (take a look at what happened with American bourbon).

 

For now, though, it’s crisis averted.

 

So, Emmanuel, looks like it might be time to send a bottle of your finest grand cru to the White House (even if its current occupant is a teetotaler) and get a handle on the immediate challenges facing your country. But don’t forget to set a 90-day reminder on your phone, because that trade war still looms on the horizon.

 

The Brits want to 'coolly negotiate'

In London, Prime Minister Keir Starmer — who has studiously avoided criticizing Trump since the U.S. president took office — started the week by warning that the era of globalization had come to an end, vowing to shield British industry from the impact of tariffs and talking up prospective trade agreements with countries such as India and Australia.

 

Starmer’s center-left government — spared the worst of the reciprocal tariffs but hit by hikes in auto and steel levies, as well as the universal 10 percent rate — has been frantically trying to land an economic agreement with Washington. The PM hinted Tuesday that he was even willing to shear off the rough edges of British tech legislation to get there.

 

While Trump’s U-turn has been welcomed in London, a spokesperson for Starmer’s office said Wednesday night that a trade war remains in “nobody’s interest,” and vowed that the government would "coolly and calmly negotiate” over the remaining tariffs.

 

One government figure, granted anonymity to speak about a sensitive area of policy, told POLITICO the key focus of negotiation, at least in the short term, will be the steep sectoral tariffs on steel and automobiles.

 

There is some optimism about Britain’s prospects of getting a deal on the sectoral tariffs — but those hopes could easily be dashed given Trump’s propensity to change his mind.

 

Poor Germany didn't even have a government!

Trump’s on-again, off-again global trade war put great pressure on Germany’s incoming conservative chancellor, Friedrich Merz, to rapidly form a government capable of helping forge a European response.

 

One of Merz’s core election promises to voters was to revitalize Germany’s struggling economy, which has contracted for two years in a row. But Trump’s tariff threats pose a particular risk to Germany’s export-oriented economy, potentially neutralizing many of Merz’s economic initiatives even before he’s had a chance to implement them.

 

Merz now advocates a carrot-and-stick approach when it comes to Trump, supporting tough countermeasures on new tariffs while also pushing for a free-trade agreement with the U.S.

 

“We are determined to fight back, and you can see from this example that [European] unity helps,” Merz said in a German television interview. But, he added, “the best thing we can do is all join together in transatlantic trade and impose 0 percent tariffs and then the problem will be solved.”

 

Gabriel Gavin, Andrew McDonald, James Angelos, Matt Honeycombe-Foster, Koen Verhelst and Joshua Berlinger contributed to this report.