US may impose trade war sanctions on the EU

The US could impose trade war-related sanctions on the European Union and other allies.

How the US administration uses tariffs, export controls and sanctions has converged into “one big compliance issue” — a situation that could become more complex for financial services firms and companies if the US approach to sanctions against Russia does not align with that of the EU and the UK, according to several experts.

While the US, UK and EU approaches have aligned in recent years, that period seems to be over. They are now on less cordial terms, as in the past, for example, when the EU has used its blocking statute to prohibit the extraterritorial application of laws adopted by third countries, which it holds to be contrary to international law.

“EU member states have, from time to time over the last few years, made noises about the fact they had the option of expanding the range of US trade-related rules that might be included in the blocking statute,” Mark Handley, a partner at law firm Duane Morris in London, told Compliance Corylated.

“So thatʼs an obvious mechanism that the EU and the UK have where they can give cover to European companies if President Trump does something that is considered sufficiently egregious — like putting sanctions on the EU, for example. Then, I imagine, it would take a very short time for EU member states to vote that [this] is something that will be added to the EU blocking statute.”

The UK has adopted this blocking measure post-Brexit, which has been used where it and the EU diverged from the US on Cuba, Libya, and Iran sanctions, Handley said. However, he added, even if Trump were to lift some Russia sanctions, he would only be able to rescind those imposed by executive order; Congress would need to vote to remove the ones it enacted.

Compliance nightmare

At least two experts expect the US to target the EU with sanctions, and possibly other allies. It has already imposed 10% tariffs and the EU has retaliated.

Saskia Rietbroek, executive director and co-founder of the Association of Certified Sanctions Specialists, told the podcast This Month in EU Sanctions: “Under the new US presidency we may not only see divergence — which is always a headache for EU companies — we could see even sanctions on Europe. That would be a compliance nightmare.

“With the current Polish presidency [of the EU] I think there will be more, I’m sure, to underscore the fact that we as Europeans continue to support Ukraine, and [our] sanctions against Russia will definitely not be going away.”

The US has previously used trade restrictions like sanctions. For example, in 2020 Trump issued an executive order prohibiting “any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any Communist Chinese military company”.

“I do think we do need to take seriously the possibility that you could see sanctions, tariffs, or export controls deployed against the EU, for instance, and potentially other close US allies. The second thing I see as new is we’re seeing tariffs essentially being used as just another form of sanction,” Marshall Billingslea, former US assistant secretary of the Treasury and presidential envoy, said on the Sanctions Space podcast.

“In recent years we’ve seen sanctions and export controls kind of converge into one big compliance issue. Now we’re going to have to add tariffs to that as well: where sanctions, tariffs and export controls are just one more tool in the arsenal of American economic warfare.”

Trump has been using tariffs to try to stop fentanyl trafficking, which historically were dealt with using sanctions, said Billingslea.

Firms and companies need therefore to think about steps the US may take to enforce its tariff policies.

“Given how big of a role trade tariffs have come to play in the current US administration’s foreign policy, it is fair to assume a growing focus within US policy circles on so-called tariff evasion — seen more and more through the lens of national security, akin to the evasion of trade sanctions and export controls,” wrote George Voloshin, global expert, anti-financial crime, at the Association of Certified Anti-Money Laundering Specialists, on LinkedIn.