Trump warns EU, Mexico of tariff retaliation in escalating trade fight
President Donald Trump threatened to impose new tariffs on goods from the European Union and Mexico, escalating global trade fights. In letters posted to Truth Social over the weekend, Trump said the U.S. would apply a 30% levy on all imports from the EU and Mexico starting Aug. 1 unless trade imbalances and drug trafficking concerns are addressed.
Trump addressed the letters to European Commission President Ursula von der Leyen and Mexican President Claudia Sheinbaum. Trump also warned that if either country retaliates with higher duties of their own, the U.S. would match and increase its tariffs accordingly.
Goods purchased in the U.S. by EU-based companies would be exempt. Similar letters were reportedly sent to 23 other U.S. trade partners, with proposed tariffs ranging from 20% to 50%.
How are markets responding?
Financial markets showed limited movement following Trump’s announcement. The euro dipped to a three-week low before recovering, and the Mexican peso lost 0.3% against the dollar.
ING strategist Francesco Pesole said markets expect volatility in Trump’s trade rhetoric but are focused more on upcoming U.S. inflation data. Cryptocurrencies saw more dramatic moves, with bitcoin reaching a record high above $120,000 amid broader investor uncertainty.
EU pushes back
Von der Leyen called the proposed tariffs “disruptive” and reaffirmed the EU’s preference for a negotiated solution. She said the bloc would continue preparing proportionate countermeasures if needed.
French President Emmanuel Macron voiced support for accelerating those preparations, while leaders in the Netherlands, Sweden and Spain criticized the tariffs as unjustified.
EU trade chief Maroš Šefčovič confirmed ongoing talks with U.S. counterparts and reiterated the EU’s readiness to act if negotiations failed. Brussels has postponed its countermeasures on U.S. steel and aluminum tariffs until early August.
What’s at stake if talks fail?
If either of the nations imposes tariffs, experts warn of significant disruption to supply chains and potential cost increases for U.S. consumers. EU officials warned of economic disruption and signaled readiness to implement retaliatory measures targeting U.S. exports. Macron and other EU leaders stressed the importance of defending shared trade interests while keeping negotiations open.
Meanwhile, U.S. companies face uncertainty about investment decisions amid shifting trade policy. Analysts noted that repeated tariff threats may undermine business confidence, despite record highs in U.S. stock markets.
Ella Rae Greene, Editor In Chief
