Transatlantic trade war would hurt both sides, European leaders warn

European leaders warned on Monday that U.S. President Donald Trump's threat to expand tariffs to the EU risked igniting a trade war that would harm consumers on both sides of the Atlantic.

European Union foreign policy chief Kaja Kallas said if the U.S. and Europe started a trade war "then the one laughing on the side is China".

"We are very interlinked. We need America, and America needs us as well," she said, speaking ahead of an informal gathering of EU leaders in Brussels.

EU diplomats say the 27-nation bloc is preparing possible responses but needs to see what Trump's next move is before finalising anything and said the aim for now is to avoid pouring fuel on the fire.

Another senior European diplomat said it was hard to plan when dealing with someone "who is totally unpredictable".

Trump told EU that it was next in line following his decision to impose sweeping tariffs on Mexico, Canada and China.

"It will definitely happen with the European Union. I can tell you that because they've really taken advantage of us," Trump told reporters on Sunday, reiterating complaints about a trade deficit.

"They don't take our cars, they don't take our farm products. They take almost nothing and we take everything from them."

Polish Prime Minister Donald Tusk called for Western unity, given the challenges both parties faced.

"It is worth doing everything possible to ensure that in the face of a Russian threat or Chinese expansion, we do not fight between allies," Tusk told reporters in Warsaw.

Canadian Prime Minister Justin Trudeau called Antonio Costa, the president of the European Council of EU leaders, on Sunday night to inform him of the Canadian reaction to the tariffs, an EU official said.

Canada has responded with retaliatory levies, and said it will challenge the 25% tariffs legally. 

US CONSUMERS TO SUFFER

Germany's conservative opposition leader Friedrich Merz said late on Sunday that tariffs risked backfiring.

"Trump will now also realize that the tariffs he is imposing will not have to be paid by those who import into America. Instead, they will have to be paid for by consumers in America," said Merz, who is likely to become German leader after an election this month.

French central bank governor Francois Villeroy de Galhau said Trump's tariffs were "very brutal" and would hit the autos sector especially.

"Everybody loses in this kind of protectionist trade war," he told France Info radio.

Shares in European carmakers fell on Monday on concerns about the impact of tariffs.

In his complaints about the trade balance with the EU, Trump has focused on goods trade alone. 

The EU has consistently exported more goods to the United States than it has imported and the U.S. goods trade deficit stood at 155.8 billion euros ($159.5 billion) in 2023, according to Eurostat data.

However, in services, the U.S. has a surplus of exports over imports with the European Union of 104 billion euros in 2023, according to Eurostat.

($1 = 0.9766 euros)