An emboldened president Donald Trump has set his sights on restructuring the more than $1trn US trade relationship with the EU, raising the spectre of another major trade war as the global economy slows.
Mr Trump, who recently signed a phase-one trade deal that cooled a bitter trade war with China, has called the EU's position on trade "worse than China" and threatened to impose tariffs on its cars and other products.
EU officials say they are willing to work with him to address some irritants in the relationship, but they warn that they will retaliate against any US efforts to punish the trading bloc. "In the economic realm, we're evenly matched. And we will defend ourselves," Norbert Roettgen, a senior German conservative lawmaker, said on Friday after meetings with White House and State Department officials. "We will respond to US tariffs, and we know how to structure them to be effective."
On Friday, two days after Mr Trump was acquitted in his impeachment trial in the Senate, the US ambassador to the EU, Gordon Sondland, said he was being recalled from his post, making the path of any future negotiations even more uncertain. Mr Sondland had testified during the impeachment inquiry in the US House of Representatives.
The near-term outcome may be a 'mini-deal' like the phase-one agreement signed with Beijing last month that does not solve bedrock issues but will allow both sides to declare a truce, trade experts say.
The United States, the world's largest importer, and the 27-member EU face entrenched conflicts over airline subsidies, agricultural trade barriers and EU plans to tax big US digital companies, among other issues.
The EU was the top US export market in 2018, before the United Kingdom left the bloc, led by aerospace products and computers.
After scotching a free trade agreement with Europe, the Trump administration is focused on shrinking its growing deficit in goods, which hit here a record $178bn in 2019.
"That can't continue," United States trade representative Robert Lighthizer said in December.
In December, the World Trade Organisation's appellate body, which acts as a supreme court for international trade disputes, became paralysed after the Trump administration repeatedly blocked the appointment of new judges.
The White House and Brussels are essentially without an arbitrator.