By Chao Deng
Trump's threatened 10% tariffs on several European allies would likely hit a range of luxury and specialty goods, pushing up prices for consumers and businesses at a time when the U.S. is already struggling to get inflation back to comfortable levels. Europe has a number of ways it can respond, each with its own implications for the U.S. economy.
-- Retaliatory tariffs: These tariffs won't cause a recession in the U.S. but could slow growth and hit an already-sluggish American manufacturing sector. The stakes rise sharply as tariff rates climb and Europe's response broadens.
-- "The Bazooka": The most severe economic escalation would come if Europe deployed its so-called anticoercion instrument, nicknamed "the Bazooka," which would allow it to target American services and investment.
This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage).
(END) Dow Jones Newswires
January 20, 2026 13:04 ET (18:04 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
