EU must adapt to 'paradigm shift' in global trade system

LUXEMBOURG: EU ministers will Monday weigh their response to a “paradigm shift” in international trade, the bloc’s trade chief Maros Sefcovic said, as US President Donald Trump’s tariffs onslaught roiled world markets.

“What we are going to discuss is how to position Europe in what I would describe as the paradigm shift of the global trading system,” Sefcovic told reporters before a meeting in Luxembourg.

EU trade ministers are meeting for the first time at a bloc-wide level to discuss Trump’s swinging tariffs that have sent global markets crashing since their announcement last week.

Trump said he would slap 20 percent tariffs on EU goods, to which the bloc has promised countermeasures should negotiations with Washington fail.

The ministers’ discussions will focus on preparing “our next move in relation vis-a-vis the United States but also how to prepare our trading system back in the European Union to prevent eventual trade diversion”, added Sefcovic, who is negotiating with Washington on the EU’s behalf.

A key aim of the meeting was to send a strong common message, with Sweden’s Foreign Trade Minister Benjamin Dousa telling reporters “the EU stands united right now”.

But divergences in approach were on display, including on the key issue of targeting trade in tech and other services — which both France and Germany have advocated.

French Trade Minister Laurent Saint-Martin reiterated that stance, and said the bloc should not exclude retaliating in an “extremely aggressive” manner.

“We must not exclude any option on goods, on services… and open the European toolbox, which is very comprehensive and can also be extremely aggressive — I am thinking of course of the anti-coercion instrument,” he said, referring to a new European trade weapon.

German Economy Minister Robert Habeck likewise said Europe should be prepared to use the new instrument — described as a trade “bazooka” — against the United States.

“Donald Trump’s announcements are an attack on rules-based trade policy,” Habeck said.

First adopted in 2023, but never used, the weapon punishes any country using economic threats to exert pressure on the EU.

But Ireland, which relies heavily on US investment, particularly in the pharmaceutical and tech sectors, warned against that course of action ahead of Monday’s talks.

Targeting services “would be an extraordinary escalation at a time when we must be working for de-escalation,” said Irish Trade Minister Simon Harris.

“It is in many ways the nuclear option if you start talking about the use of the anti-coercion instruments and the likes,” he said.

The ministers will also discuss EU-China trade relations, which will require careful handling as Brussels fears that US tariffs will lead to a flood of Chinese goods into the bloc but it wants to avoid further tensions with Beijing.