European Union counterpunches with $3.3 billion in new U.S. tariffs, and China dials up the rhetoric

The European Union retaliated against President Trump's steel and aluminum tariffs Friday with tariffs on about $3.3 billion worth of American goods, including bourbon, orange juice, peanut butter, and motorcycles. The tariffs, mostly 25 percent, are designed in part to "make noise" by targeting politically important states like Kentucky, Florida, and Wisconsin, EU trade commissioner Cecilia Malmstrom said. The EU implemented the tariffs a week earlier than expected, "a signal that the EU is striking back and taking this seriously," said economist Holger Schmieding at Berenberg Bank in London.

The EU is just one region counterpunching against the Trump administration's tariffs. Turkey is targeting U.S. products and India has announced tariffs on 29 U.S. products, including steel and iron, almonds, walnuts, and chickpeas. Trump is also looking at new tariffs on auto imports, opening a new front in the trade war. The big trade conflagration, however, is with China. The U.S. will start imposing new levies on $34 billion in Chinese goods on July 6, with $16 billion to come later and then up to $400 billion more; China vows immediate tariffs on soybeans and other agricultural products. By the first week in July, $75 billion in U.S. products will be hit by new foreign tariffs, according to the U.S. Chamber of Commerce's John Murphy.

"We've never seen anything like this," at least not since the 1930s, said Mary Lovely, an economist at Syracuse University. Trump is wagering that his tariffs will inflict more pain than they cause, forcing trade partners to capitulate. China, which has started fashioning itself as the global defender of free trade, is starting to escalate its rhetoric, too. "We oppose the act of extreme pressure and blackmail by swinging the big stick of trade protectionism," China's Commerce Ministry said Thursday. An editorial Friday in the state-run China Daily newspaper called the protectionist "trade crusade of Trump and his trade hawks" a self-defeating "symptom of paranoid delusions."

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