EU officials have begun assembling a list of US goods including whiskey, orange juice and dairy products to target for retaliation over Donald Trump's plans to invoke national security concerns to limit steel imports.
The EU's contingency plans, which have emerged as Mr Trump and other leaders gather at a G20 summit starting on Friday, highlight the tensions set off by the US president's threat to impose new tariffs or quotas on steel — which analysts say could provoke a new trade war.
Speaking on Friday at the summit in Hamburg, European Commission president Jean Claude Juncker declined to detail any possible EU retaliation but said Europe would respond to any US steel sanctions.
"Our mood is increasingly combative," Mr Juncker said as he indicated Brussels would react to Washington not in months but "days".
Mr Trump has promised for weeks to crack down on steel imports under a 1962 law that allows such measures on national security grounds.
Since the US exports little steel to Europe, EU officials have focused their plans for retaliation on agriculture and other politically sensitive products. These include bourbon whiskey, one of the main exports of the state of Kentucky, the home of Mitch McConnell, the US Senate majority leader.
US officials insist Mr Trump's plans will increase pressure on China and force Beijing to stop flooding global markets with cheap steel.
But Chinese steel imports into the US have fallen dramatically in recent years, as the US has stepped up anti-dumping measures, As a result, US allies such as Canada, Germany, Japan and South Korea are likely to bear the brunt of any such move.
With up to $12bn in EU exports to the US likely to be affected, the bloc's officials have appealed to Washington to exclude European allies from any crackdown. The governments of other G20 allies, such as Canada, Mexico, Japan, and South Korea, have made similar calls.
One senior EU official expressed hope that Mr Trump could be convinced at this week's G20 meeting that any unilateral US action on steel would be counterproductive.
The EU shares US concerns about Chinese steel and aluminium and European officials say they are willing to work with the Trump administration to increase pressure on Beijing.
But the EU official added that "it will be very hard politically to co-operate on those issues if we are not excluded [from the impending sanctions]".
EU officials are also preparing to challenge a US crackdown at the World Trade Organisation.
WTO rules allow members to cite a national security exception to erect trade barriers in times of war. But such a move has rarely been made in peacetime.The nature of any EU retaliation will depend on the precise action taken by the US. The administration is currently engaged in a debate between economic nationalists and a more business-friendly faction over whether to impose a broad tariff on all steel imports or to use quotas and other measures to limit the impact on allies.
But the European official said the EU was preparing to retaliate "relatively quickly", adding that any measure that restricted EU exports to the US would demand a response.
"The signal that we have been giving is that we are absolutely ready to work with the US on [getting tough with China on steel]," the senior European official said. "If despite that they are willing to do something that hurts us it will raise serious questions about the ability to co-operate with the US on trade."
Another EU official said: "As we have been consistently saying, we do not see evidence that imports, and certainly not those from the EU, impair or threaten to impair US national security and we hope therefore for those security exceptions not to be misused".
The official noted that Cecilia Malmström, the bloc's trade commissioner, had said that the EU "will have to respond" to any US measures that hit EU companies, while adding: "As long as no measure has been taken we will not speculate about any specific reaction or its timing."
The transatlantic tension contrasts with the EU's announcement on Thursday that it had agreed in principle on a wide-ranging trade deal with Japan.
EU officials now maintain that any resumption of stalled negotiations with the US over a comprehensive transatlantic deal is unlikely. US officials also argue that elections in Germany and other European countries this year have made any such negotiations politically unrealistic.
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