The trade war with Mexico may be over almost as fast as it started but a far bigger battle may be about to break out.

According to the Telegraph, Donald Trump is considering plans to impose a 10% tariff on the EU, a move which would "would pour fuel on the blooming global trade war which began on Saturday when the new US president slapped sweeping levies on goods imported from Mexico, Canada and China."

The newspaper adds that according to a source close to Trump’s administration there is not broad agreement “but some want to put a 10 per cent tariff on the EU”. “They’re talking about doing it on all imports from the EU.”

A second source told The Telegraph: “Trump is testing the water with Canada and Mexico and what he can get away with.”

Speaking as he returned to Washington from his Mar-a-Lago estate in Florida on Sunday, Trump said tariffs on the EU “will definitely happen”.

“I can tell you that, because they’ve really taken advantage of us – you know, we have [an] over $300 billion (£241.5 billion|) deficit,” he added.

“They don’t take our cars, they don’t take our farm products. They take almost nothing, and we take everything: from the millions of cars, tremendous amounts of food and farm products.”

In response, EU policymakers could hit various US imports with duties of 50% or more if Mr Trump goes ahead with his plans for tariffs, the Financial Times reported. On Sunday, Trump also warned that the UK is “out of line” in its trade with the US but suggested the imbalance could be “worked out”.

Asked if any issues could be ironed out, Mr Trump said Sir Keir has “been very nice”. He added: “We’ve had a couple of meetings. We’ve had numerous phone calls. We’re getting along very well.”

Facing the threat of fresh tariffs, Olaf Scholz, the German chancellor said on Monday that Europe “can react to tariff policies with tariff policies”.

During his first term, Trump imposed a 25% tariff on steel imports and 10pc on aluminium from the European Union (EU). The bloc responded in 2018 by placing levies on US goods including whiskey, motorcycles and denim. The bloc responded in 2018 by placing levies on US goods including whiskey, motorcycles and denim.

In response to the Telegraph report, which is just the first of many such notices of more tariffs, the euro skid, and has almost completely reversed its earlier gains following news that US trade war with Mexico is effectively over.

That said, trade wars with Canada and China remain and it looks like Europe is about to be thrown in the mix.