San Francisco Frontiers - Facing Trump's trade war, EU seeks to quell divisions

The mood was sombre at talks in Luxembourg as stocks and oil prices sank further on what EU trade commissioner Maros Sefcovic called a "black day" for global markets.

Sefcovic starkly described how markets were reacting to "most important paradigm shift in global trading patterns since the Second World War."

At their first talks since Trump ordered 20 percent tariffs on the bloc's imports last week, the trade ministers all agreed that Brussels must seek to avoid an all-out trade war through negotiations.

But Sefcovic, who has been holding talks with Washington on the bloc's behalf, also warned that "engaging the US will take both time and effort".

Faced with a US effort to "transform the global trading system" through tariffs, he suggested the EU could put remedies on the table but they may not be accepted by Trump.

EU chief Ursula von der Leyen said the bloc had offered the United States a bilateral tariff exemption for cars and other industrial goods, to which Washington has not responded.

- Need for 'de-escalation' -

If talks fail however, the EU is willing to deploy "every tool in our trade defence arsenal to protect itself, Sefcovic warned.

There is a lot at stake. He said Trump's tariffs including those on steel, aluminium and cars meant 380 billion euros ($415 billion) worth of EU exports -- some 70 percent -- to the United States face levies of 20 percent or more.

Ministers hoped to narrow their differences over what that response could entail.

The idea of targeting American tech titans such as Microsoft, Amazon, Google, and Meta has been raised but there is scant detail on exactly how the EU would do so.

Backed by Germany and Austria, France has been pushing to target US services, including digital -- drawing fire from Ireland which relies heavily on US investment, particularly in the pharmaceutical and tech sectors.

The idea is not popular with Baltic states, heavily dependent on Washington for security.

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

France and Germany have, however, said the EU must be ready to respond firmly, with French Trade Minister Laurent Saint-Martin saying the bloc should "not exclude any option".

Europe had at its disposal tools which are "very comprehensive and can also be extremely aggressive", he said.

He referred specifically to a new trade weapon -- nicknamed a "bazooka" but formally called the anti-coercion instrument -- which punishes any country using economic threats to exert pressure on the EU once diplomacy fails.

The tool gives the EU greater powers including restricting US companies from public tenders and limiting trade on services.

Germany has also said the EU should be prepared to use it.

- 'No idea' -

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

Sefcovic said his visit to China last month was "clearly guided by the fact that we need to re-engage" with Beijing, but that it did not mean irritants in bilateral trading had disappeared because of the US tariffs.

As he pushed for negotiations with the United States and trade deals with others, EU diplomats privately expressed little hope for a positive outcome with Trump.

"I don't know how you can negotiate out of this," one diplomat said.

"But what are the politicians supposed to say? 'Prepare for the crash?' I mean they have no idea what to do."

H.Reyes--SFF