Europe welcomed a reprieve in the trade war with the United States on Thursday, though President Donald Trump's decision to pause new tariffs on EU imports for 90 days while retaining a minimum 10% global duty were more temporary ceasefire than peace deal.

From Europe to Asia, national stock markets — sent into a tailspin last week — rebounded after Trump climbed down from his threat to further escalate with countries all over the world late Wednesday. Soon after, the European Union, the world's largest free trade zone composed of 27 countries, announced its own 90-day pause on new tit-for-tat measures.

"We want to give negotiations a chance," European Commission President Ursula von der Leyen wrote on X, putting on ice EU plans to hit back with import duties on more than €20 billion ($22 billion) of US goods. “If negotiations are not satisfactory, our countermeasures will kick in."

China, however, remained fully in the firing line. The US further hiked up tariffs on Chinese imports to an eye-watering 125% as Beijing imposed its own retaliatory rate to 84%.

Footing the bill for 'America First'

But for everyone, the situation remains highly volatile. The Trump administration has said the goal of the radical wave of tariffs is to force partners into new or revised trade deals that better serve US interests. Trump has long sought to resurrect the US as a manufacturing superpower, reducing imports of goods like steel and aluminum to support domestic industry.

While the Trump administration has claimed the pause was part of its strategy all along, it's also possible that the consequences of high stakes "America First" trade brinkmanship simply proved too hard to stomach.

Trump's April 2 announcement that he would impose sweeping 10% tariffs on almost all imports sent stock markets into a sell-off frenzy. The S&P 500, composed of leading US companies, lost $5.83 trillion in market value in the four days up to Tuesday, Reuters reported.

Not out of the woods

The freshly announced pause starts a three-month timer running. Europe is still weighing up how much muscle to wield in its broader retaliation, with the bloc having long stressed it prefers negotiations over escalation.

For Karel Lannoo of the Centre for European Policy Studies, this was and remains the right course of action."We can negotiate and we have to negotiate," he told DW. When former European Commission President Jean-Claude Juncker went to see Trump in 2018 during his first presidency, he eventually got a deal, Lannoo pointed out.

At the same time, the EU should remain prepared to hit back. "You have to react if they impose restrictions, you have to defend your market. But of course, the optimal is that you have zero tariffs," he said.

What does the EU have up its sleeve?

The EU's planned counter tariffs — now on hold — were brewed up in response to US steel and aluminum duties on the EU which remain in place, and predate Trump's bigger order on so-called reciprocal tariffs.

On Wednesday, EU diplomats told DW that the first batch of would-be EU counter tariffs of up to 25% were set to target US steel and aluminum, and a series of food products including poultry, nuts and soybeans.

With an apparent focus on hitting the heartland of Trump's Republican Party, the bloc's list of planned tariffs would also have included a host of other items from motorcycles to jeans, with the aim of making the goods more expensive and less attractive for European buyers. 

The pause now gives Brussels breathing room as it seeks to negotiate a deal with Washington to avoid a full-blown trade war.

Deal or no deal?

The question now is what the EU could do to make Trump change his mind.

EU Trade Commissioner Maros Sefcovic has been on and off planes and phone calls to Washington for weeks, trying in vain to secure a deal to avert tariffs. After Brussels went public with its offer to scrap all duties on cars and industrial goods earlier this week, Trump was quick to turn it down.

On Thursday, a European Commission spokesperson confirmed that there were no plans for fresh EU-US meetings on the topic at present.

Cinzia Alcidi, another analyst with the Centre for European Policy Studies, thought that only more US domestic pressure would push Trump to cut a deal. "Tariffs, which are fundamentally a tax on domestic consumers, will lead to higher prices. Businesses, especially those reliant on imported components, will also struggle," she wrote on Tuesday.

"If inflation climbs and public dissatisfaction grows, Trump's approval ratings may dip, and unease within Congress may grow louder." 

US tech, services – the 'nuclear option'

As Europe mulls longer-term retaliation options, US services exports, including those of Big Tech platforms or consulting firms, could move into the EU's focus down the line.

Sometimes referred to as Brussels "nuclear option" on trade, the EU's so-called Anti-Coercion Instrument (ACI) "allows [the EU] to do many more things than the normal trade war would allow you to do," said Niclas Poitiers, a research fellow at Brussels-based think tank Bruegel.

The ACI — created in 2023 in response to China's suspected block on Lithuanian imports over its support for Taiwan — would allow the EU to impose restrictions on US banks, curb revenue access for streaming platforms like Netflix, or even revoke US patents.

But an EU diplomat told DW on Wednesday, before the pause was announced, that there was "no appetite to pull that trigger for now," adding that any talk of targeting tech remains "in the realm of speculation."

Edited by: Uwe Hessler, Martin Kuebler

Update, April 10, 2025: This article was first published on April 9, and has been updated twice with the latest developments regarding EU tariffs.