The EU Commission has proposed 25% counter-tariffs on various US imports in response to US steel documents, effective from May 16.
Additionally, US bourbon has been excluded from these tariffs, potentially reflecting political considerations involving Kentucky senator Mitch McConnell or in response to a threat from Trump regarding European spirits.
Background on Tariffs
The Commission’s decision to impose these countermeasures stems from earlier US restrictions on European steel and aluminium, originally introduced during the Trump administration under national security grounds. These limits remain in place in altered form, even after recent negotiations, and Brussels has opted to proceed with proportionate retaliation as the grace period draws to a close.
The 25% tariffs span a range of sectors not limited to automotive components, agricultural machinery, and consumer goods. The omission of American-made bourbon is not accidental—it appears to reflect internal dynamics within US politics. Kentucky, a major bourbon-producing state, holds political weight, making its exclusion noteworthy. This nuance should not be disregarded, particularly ahead of a volatile US election season, as it sheds light on where the Commission believes leverage might be most practical—or most inflammatory.
There is a broader suggestion here that Brussels is prepared to respond decisively when economic pressure, rather than diplomacy, is used as the main tool by its allies. Tariffs are not simply economic instruments; they serve as a calibrated message, replied to when the terms of engagement become too lopsided to tolerate. On our side, this implies that agreements on transatlantic trade remain uneasy, and the underlying issues, while re-labelled, have not been defused.
So what does this mean going forward? As May 16 approaches, we should expect increased volatility on products related to the tariff lists. Pricing around agricultural equipment, motor vehicle subcomponents, and certain machinery classes is likely to face additional stress. Cost pass-downs are rarely contained, and bystanders in the form of associated manufacturing and distribution shares tend to absorb part of the shock. This makes short-term pricing in these segments unpredictable, but not unknowable.
Exemption Implications
It also opens the door for retorsion announcements or limited-scale carve-outs from Washington, which could trigger momentary shifts in expectations that might be corrected later. Traders need to watch for legislative noise or executive directives in the fortnight ahead. Even if they are not binding immediately, they can push spreads out of sync before markets adjust again.
The exemption of spirits from this round also deserves scrutiny. While it does not directly influence the listed commodities, its absence affects sentiment across hospitality and related luxury consumer names. Once traders catch wind that one sector has been spared, they may look at others for indirect shelter. This runs the risk of inflating safety assumptions in segments not materially shielded.
We should keep in mind that the Commission has retained broader mechanisms under the World Trade Organization’s guidelines, and its legal basis rests on pre-agreed retaliation thresholds. That limits how far either side can escalate without outside arbitration, but timing still matters—and timing is exactly what this move is about. It’s not just tit-for-tat; it’s sequencing, and it’s happening before summer negotiations solidify.
We’re now entering a window where broader European sentiment towards American industrial policy could quicken regulatory responses elsewhere, especially in green subsidy alignment or digital taxes. That again doesn’t fall into tariff territory directly but can weight valuations across multiple regions. Thus, we advise close attention to any bilateral summits or working group reports that emerge, even those not directly related to steel or spirits. They tend to feed into broader risk profiles in ways often visible only in hindsight.
From a strategy perspective, these next three weeks are less about holding trades and more about positioning lightly, using order book depth when spreads widen unusually. The firms that move markets here aren’t operating on guesswork—they’re reacting to signals baked into policy leaks, lobbyist patterns, and procedural timelines. We should do the same.
