As the United States approaches key deadlines, the news flow is likely to switch over the coming weeks back to tariffs, including those against the European Union, said ABN Amro.

Aside from the uncertainty over what the U.S.'s ultimate policy goal is -- is it revenue-raising, or is it a genuine desire to boost US exports? -- there is also the uncertainty of how the EU plays its hand, both in negotiations and in any possible retaliation, wrote the bank in a note. EU trade commissioner Maros Sefcovic was in Washington D.C. last week for talks with President Donald Trump's trade team, where officials were quoted claiming there was 'positive momentum' in the talks, which mostly focused on car tariffs.

The EU is reportedly open to lowering its tariffs as part of a deal and talking up the potential to buy more U.S. liquefied natural gas as the continent continues to transition away from Russian gas, pointed out ABN Amro.

Should the U.S. go ahead with steep tariff rises, the bank continues to think any EU retaliation will be targeted and aimed at politically sensitive goods, meaning its impact on inflation should remain limited.

If this doesn't succeed, the EU could deploy its 'bazooka', the anti-coercion instrument (ACI), added ABN Amro. While the U.S. has a trade deficit in goods with the EU, it enjoys a significant surplus in services, largely thanks to the dominance of U.S. Big Tech.

The ACI would seek to hit the U.S. services surplus through some potentially extreme measures, including suspension of intellectual property rights, for example allowing free use of software and applying duties to streaming services and other digital platforms.

President Donald Trump's nominee for Chair of the White House Council of Economic Advisors, Stephen Miran, has proposed putting U.S. defense on the table if the EU threatens to respond aggressively to U.S. tariffs. But with the U.S. already significantly watering down its defense commitment to Europe, this arguably weakens the US's hand, according to the bank.