BERLIN

German Chancellor Olaf Scholz on Monday said that the EU has the capacity to retaliate against US tariffs.

Speaking in Brussels ahead of the EU’s first-ever leaders’ meeting exclusively dedicated to defense, Scholz said that the subject of EU-US cooperation would be an intense topic of discussion.

"Both the US and Europe benefit from the trade of goods and services. If trade policies make this more difficult, it will be bad for both," he said.

Scholz underscored the EU’s ability to react to the US tariffs.

"What is clear is that as a strong economic region, we can shape our policies in response to tariffs with our own tariffs. This is something we need to do and will do. The goal should ultimately be to proceed in a way that leads to cooperation."

Fulfilling an election campaign promise, US President Donald Trump signed an executive order on Saturday to impose a 25% tariff on imports from Canada and Mexico and a 10% tariff on imports from China.

The EU is now bracing for its own trade war.

On Sunday night, Trump told reporters that he would “definitely” impose tariffs on European goods.

“I can tell you that, because they've really taken advantage, you know, we have over $300 billion deficit,” Trump said. “The European Union, it's an atrocity what they've done.”

EU-US trade relations

Christian Democratic Union (CDU) leader Friedrich Merz expressed concerns over potential US tariffs on the EU during his party’s congress on Monday, warning that tariffs have never been a good way to resolve trade disputes.

Merz said that Trump’s tariffs would ultimately hurt American consumers.

"The EU must enter negotiations with the US as a united front," he said.

Trump’s tariff threats come ahead of Germany’s early elections.

The three-party coalition government collapsed last November due to disagreements over budget and economic recovery measures.

Germany will hold early elections on Feb. 23. One of the key issues in the campaign is the struggling economy.

The German economy shrank for the second consecutive year in 2024.

After contracting by 0.2% in the last quarter of 2024, the economy faces a technical recession if it continues to shrink in the first quarter of 2025.