Tariffs

On 8 May 2025, the European Union launched a public consultation on potential countermeasures in response to U.S. automotive tariffs and the potential imposition of a 20% “reciprocal” tariff on EU-origin goods—covering around €379 billion of EU exports to the U.S.  In particular, the EU is considering imposing tariffs on U.S. imports worth approximately €95 billion, covering a wide range of industrial and agricultural products.  The Commission is also evaluating possible restrictions on EU exports to the U.S., principally steel scrap and certain chemical products, valued at €4.4 billion.  If implemented, the export restrictions could take the form of export duties, quantitative restrictions such as quotas or licensing requirements, additional administrative charges, or a combination of these measures.  No specific tariff rates have been proposed at this stage and the consultation is open until 10 June.  Notably, the EU has not thus far targeted U.S. services as part of its retaliatory measures.

These countermeasures could be activated if ongoing EU-U.S. negotiations fail to deliver a mutually acceptable resolution, and the U.S. tariffs remain in place.  While the U.S. currently imposes a 10% global reciprocal tariff on most imports, the negotiations follow a decision by President Trump to pause higher, country-specific tariff rates that were scheduled to come into effect on April 9 and would have increased the reciprocal tariff rate on U.S. imports from the EU to 20%.  Those higher tariffs are paused for 90-days, or until 9 July 2025, absent an extension.  EU exports of autos and auto parts to the U.S. are also subject to 25% tariffs, while the U.S. is also considering imposing additional sector-specific tariffs on—among other sectors—imports of pharmaceuticals and related ingredients; semiconductors and semiconductor manufacturing equipment and their derivative products; critical minerals and their derivative products; as well as commercial aircraft, jet engines, and related parts.  Should it proceed with any of these measures, the EU is likely to increase the scope of its proposed response.

If adopted, the EU countermeasures would supplement the existing EU “Rebalancing Tariffs” previously introduced—and suspended until 14 July—in response to increased U.S. steel and aluminum duties.  Most of the products covered by the Rebalancing Tariffs would be subject to a 25% ad valorem duty, with some facing a reduced rate of 10%.  The Rebalancing Tariffs would apply to U.S. goods exports worth up to €26 billion.

The Enforcement Regulation and the Anti-Coercion Instrument

In preparing for a scenario in which negotiations with the U.S. fail to bring tariff relief, the EU has several legal instruments at its disposal to take responsive countermeasures, most notably the Enforcement Regulation and the Anti-Coercion Instrument (ACI), with some overlapping and some distinguishing features.

A. Intended Use of the Two Instruments

The Enforcement Regulation is a long-standing mechanism designed to enforce the EU’s rights under international trade agreements, including under World Trade Organization (WTO) agreements.  Initially adopted in 2014 and amended in 2021, it empowers the EU to respond to breaches of trade obligations—particularly when a trading partner withdraws concessions granted under WTO agreements or fails to implement a ruling adopted by the WTO Dispute Settlement Body.  Crucially, the amended Regulation now allows the EU to act unilaterally when multilateral adjudication is not possible, including in the absence of a functioning WTO Appellate Body (which has lacked the necessary quorum since late 2019, following a U.S. refusal to appoint additional members to the body).Continue Reading EU Consults on New Tariffs on €95 Billion of U.S. Imports

Introduction

The Trump Administration’s implementation of significant and widespread tariffs – and the potential for additional and farther-reaching tariffs – represents more than just a trade challenge.  For companies engaged in international commerce, the uncertainty created by these measures increases the risk of commercial disputes.  Among other things, tariffs can increase costs, reduce margins, and reveal contractual assumptions and ambiguities that lead to disputes throughout the supply chain:  between buyers and sellers, manufacturers and distributors, and in a variety of other business dealings.

Below we highlight four key questions for assessing and mitigating commercial dispute risks. Whether reviewing existing contracts or negotiating new ones, companies should take strategic steps to protect their interests and minimize potential disputes and supply chain disruptions.  

Background:  Tariffs Under the Trump Administration

Since the America First Trade Policy memorandum that President Trump signed on the first day of his second term, the current administration has imposed a variety of country- and product-specific tariffs, threatened additional tariffs, and promised other future actions.  Importers, foreign producers, and U.S. purchasers of imported products all face a heightened risk that products that they have contracted to purchase or supply may be impacted by tariffs, at times potentially altering the fundamental bargain between the parties.  The threat of retaliatory tariffs leads to even further uncertainty.

At the time of publication, the Trump Administration has imposed or threatened to impose a variety of tariffs under an array of different statutory authorities.  For instance: 

  • Canada, Mexico, and China Tariffs:  President Trump ordered 20% tariffs on products from China and 25% tariffs on products from Canada and Mexico not covered by the U.S.-Mexico-Canada Agreement (“USMCA”) under the International Economic Emergency Powers Act (“IEEPA”). 
  • Steel and Aluminum Tariffs:  Separately, for the Section 232 tariffs on steel and aluminum, President Trump removed country-specific exemptions, is phasing out the product-specific exclusions and removing General Approved Exclusions, and is creating a petition process for the expansion of the tariffs to derivative steel and aluminum products not already covered. 
  • Reciprocal Tariffs:  Meanwhile, the Office of the U.S. Trade Representative and the Department of Commerce are leading a broad review of foreign trade partners to determine whether they are imposing nonreciprocal tariffs and other trade restrictive measures, for the United States to respond in kind (possibly with higher tariffs of its own). 
  • Other Potential Tariffs:  All the while, myriad agencies are reporting to the President in April on a variety of trade and tariff issues, which could serve as the foundation for additional, future tariff actions by the Trump Administration.

Continue Reading Trump 2.0 Tariffs and Commercial Disputes:  Key Questions to Consider

On 12 March, the European Commission responded to the imposition of new U.S. tariffs on EU steel and aluminum imports.  The Commission pledged to implement “swift and proportionate countermeasures on U.S. imports into the EU,” signaling a firm stance while leaving the door open for future negotiations.

Announced Countermeasures under the Enforcement Regulation

The EU’s response is made up of two measures:

  1. The reinstatement of 2018 and 2020 EU additional ad valorem duties on certain U.S. imports (“Old Rebalancing Measures”):  In 2018, the first Trump Administration introduced 25% and 10% tariffs on EU steel and aluminum exports, respectively, under Section 232 of the Trade Expansion Act of 1962.  As a response, the EU adopted a list of additional ad valorem duties on certain U.S. imports.  In 2020, the first Trump Administration extended the tariffs to cover certain steel and aluminum derivative products.  The EU then adopted a broader list of additional ad valorem duties on certain U.S. imports.  Adopted under the Enforcement Regulation, these Old Rebalancing Measures were designed to maximize political pressure on the first Trump Administration to rescind its tariffs.  They were suspended in 2023 following an agreement with the Biden Administration.

    As the suspension of the Old Rebalancing Measures expires automatically on 31 March, the Commission will reimpose them.  These Old Rebalancing Measures cover approximately €8 billion worth of EU imports from the U.S., intended to be proportionate to addressing the economic damage inflicted by the U.S. tariffs, and concern products ranging from boats to bourbon to motorbikes.

  2. New EU measures under Article 5 of the Enforcement Regulation (“New Rebalancing Measures”):  In response to the fresh U.S. tariffs impacting another €18 billion of EU exports, the Commission now plans to roll out new or additional ad valorem duties under Article 5 of the Enforcement Regulation (see the suggested product list).  A stakeholder consultation is open for comment from 12–26 March, gathering input from affected industries.  Following this, the Commission will draft an implementing act and consult Member States through the comitology procedure (as provided by the Enforcement Regulation).  The implementing act is scheduled to take effect mid-April, bringing the total value of U.S. exports potentially impacted by the Old and New Rebalancing Measures to €26 billion.

Continue Reading EU’s Reaction to New U.S. Tariffs on Steel and Aluminum

On February 20, 2025, the Office of the U.S. Trade Representative (“USTR”) announced that it is seeking public comments on any unfair trade practices and non-reciprocal trade arrangements implemented by foreign trading partners. The comment period is currently open and the deadline for submitting comments is March 11, 2025.

According to the Federal Register notice, comments can be submitted through a portal accessible at https://comments.ustr.gov/s/, under docket number USTR-2025-0001. USTR will accept comments from any interested party, including businesses, individuals, and trade associations, among others. Interested parties are able to include business confidential information in their submissions, which will not appear in the public version of their comments.

USTR’s announcement also stated that the public comment process is not the only opportunity to provide information to the agency on these issues, and that USTR “welcomes ongoing engagement with and information from any interested party.”

This comment period offers a new opportunity for U.S. exporters to seek the Administration’s  potential support in eliminating foreign market access barriers. If you are interested in submitting comments to USTR as part of this process, Covington can assist in the preparation and transmission of these comments. We would also be happy to assist in crafting a broader strategy for engaging USTR and other relevant agencies on these or other trade-related issues.

Background

USTR’s launch of this public comment process follows the issuance of the “America First Trade Policy” memorandum by President Trump on his first day in office, which directed USTR to lead a review of unfair foreign trade practices and to recommend appropriate remedies. USTR also linked the comment process to President Trump’s “Reciprocal Trade and Tariffs” memorandum issued on February 13, which directed USTR and the Commerce Department to investigate “the harm to the United States from any non-reciprocal trade arrangements adopted by any trading partners” and to recommend actions in response. Covington’s alert on this memorandum is available here.

Scope of Requested Comments

USTR has invited comments on a country-by-country basis (or also on an economy-wide basis in the case of the European Union) regarding (i) “any unfair trade practice by a foreign country or economy”; or (ii) “any non-reciprocal trade arrangements.” USTR has defined unfair trade practices broadly, to include “policies, measures, or barriers that undermine or harm U.S. production, or exports, or a failure by a country to take action to address a non-market policy or practice in a way which harms the United States.” USTR has also requested that comments quantify the harm caused by such practices—ideally with a corresponding dollar amount—and to explain the underlying methodology used to calculate that figure.Continue Reading USTR Seeks Public Comment on Unfair or Non-Reciprocal Trade Practices