As Trump stood in the Rose Garden yesterday and announced a combination of specific tariffs on key trading partners and a blanket 10% hike on all other nations, leaders across the world prepared their responses.

Some, like Britain’s prime minister, Sir Keir Starmer, said the White House was acting in the best interests of the U.S.—and pledged to do the same for Britain, with a “cool head.” Others, like Ursula Von Der Leyen, president of the European Commission, promised swift and continued retaliation.

“We are already finalizing a first package of countermeasures in response to tariffs on steel,” she said in a statement issued on April 2. “And we are now preparing for further countermeasures to protect our interests and our businesses if negotiations fail.”

China—now facing a cumulative 54% duty on its exports—urged the Oval Office to “immediately cancel” the executive order, adding that it and many other nations were “strongly dissatisfied” with the “unilateral bullying practice.”

The scene has therefore been set for the trade war to escalate—even if some of the players fear the ramifications of such an escalation.

In a note this morning seen by Fortune, UBS said that in the coming quarters, tariffs are expected to be notched down for some nations and inched higher for others.

“In our base case, we would expect tariffs to be reduced from the levels announced by the President,” wrote Mark Haefele, chief investment officer at UBS. “The President himself invited negotiations, and Treasury Secretary Bessent said in a Bloomberg interview that the announced tariffs are ‘the high end of the number’ and that countries could take steps to bring tariffs down. However, this process will likely take time.

“And in the near term, the principle of the U.S. imposing ‘reciprocal’ tariffs could even mean that some tariff rates increase if other countries retaliate.”

This warning was echoed by Deutsche Bank’s Jim Reid, who wrote in a note Wednesday: “Trump’s comments did leave the door open for potential negotiations to lower tariffs, but his executive order also left room for further escalation, saying that the President may further ‘increase or expand in scope the duties imposed’ should any trading partners retaliate. So watch out for these headlines.”

President Trump hasn’t just refused to rule out the possibility that tariffs could bounce even higher than their current levels—he has threatened it himself.

The Republican politician previously wrote on his social media platform, Truth Social, that if the EU and Canada worked together against American interests, they would face hikes “far larger” than those announced on April 2.

On top of that, President Trump’s speech on April 2 hardly sounded like a door closing on any further measures.

He referred to the current measures on “friend and foe” alike as “kind reciprocal,” adding: “This is not full reciprocal.”

Haefele added he expects to see tariff-related slowdowns across the economy in Q2 and Q3 of 2025, adding: “The Trump administration’s actions had already increased the U.S. effective tariff rate from 2.5% to approximately 9.0%, the highest since World War II.

“Our initial estimates suggest that Wednesday’s announcements would bring the effective tariff rate around 15 percentage points higher, to around 25%. Even if tariffs are ultimately reduced by year-end, the near-term shock and associated uncertainty is likely to drive a near-term slowdown in the US economy and reduce full-year 2025 growth to closer to or below 1%.”

How might other countries respond?

One of the most notable headlines from the April 2 announcement was that the EU now faces tariffs of 20%. The key trading ally to Uncle Sam was missed out in the first few rounds of tariffs, which saw sanctions placed on China, Mexico, and Canada.

President Trump’s criticism of the “nice European little countries” ramped up ahead of Wednesday’s announcement, despite trade volumes of goods and services between the U.S. and the EU topping out at more than $1.5 trillion a year.

Already analysts are speculating about how the EU will respond as European politicians air their dismay over President Trump’s trade war.

Goldman Sachs’s Filippo Taddei analyzed potential measures the trading bloc could take, writing in a note seen by Fortune: “In our view, the EU will design its trade policy retaliation following three main criteria: in ‘value terms’ against product-specific tariffs (steel, aluminum, critical imports and auto), in “tariff rate terms” to the broader reciprocal tariffs…and on services thanks to the new policy instruments.”

Taddei added the goods selected for product-specific tariffs will first work from a list of targeted U.S. exports before adding a further list of items which could be replaced by other trading partners.

One area where the EU could hurt the U.S. is in services. The EU has a trade surplus with the U.S. on goods, worth $173 billion (€157 billion), while the U.S. holds a surplus on services, worth $117 billion (€109 billion).

Therefore, it is on services—an area where American companies are reliant on European customers to a major extent—where the EU could strike hardest.

“In our view, the EU will try to de-escalate trade tensions as much as possible,” added Taddei. “However, in contrast to the 2018–20 trade war, the EU is now equipped with policy tools to extend the range of retaliation against U.S. tariffs to target imports of U.S. services. We assess this option to be a last resort that the EU Commission would consider only if the U.S. administration opts for a broad-based aggressive commercial policy against Europe.”