* U.S. Trade Representative says EU to get "pause" on tariffs
* U.S. steel, aluminium tariffs set to enter force on Friday
* EU taxation a further source of transatlantic strain (Adds Merkel)
By Philip Blenkinsop
BRUSSELS, March 22 (Reuters) - German Chancellor Angela Merkel said EU leaders were still waiting for the final word from U.S. President Donald Trump on whether the United States would apply tariffs to European steel and aluminium, and warned of a firm response if he did.
U.S. Trade Representative Robert Lighthizer had earlier told a Senate committee hearing that Trump had chosen to "pause" the imposition of metals tariffs for Argentina, Australia, Brazil, Canada, Mexico South Korea and "Europe".
Merkel said it was not clear what Trump's decision had been, meaning EU leaders would have to return to the topic on Friday.
"We believe that tariffs are not justified and we are seeking more talks," she told reporters in the early hours of Friday.
"If they do raise tariffs then we will respond with counter-measures. That was our common view. We want good transatlantic relations, but we will react if we believe that international trade rules have been harmed."
The United States is set to begin charging import duties of 25 percent on steel and 10 percent on aluminium from Friday.
The exemption from tariffs, if it is confirmed, followed EU Trade Commissioner Cecilia Malmstrom's trip to Washington for talks with Lighthizer and U.S. Commerce Secretary Wilbur Ross.
Briefing EU ambassadors and the European Parliament on Thursday morning, she had indicated there was a greater willingness to find a solution to avert a trade war.
French President Emmanuel Macron said he expected a final announcement on U.S. tariffs late evening Brussels time.
"My wish is that we can continue to preserve international trade rules that are good for all and that the powers that have contributed to putting them in place will assure that they are respected," he said.
The European Commission has proposed that, if tariffs are imposed, the bloc should challenge them at the World Trade Organization, consider measures to prevent metal flooding into Europe and impose import duties on U.S. products to "rebalance" EU-U.S. trade.
The EU leaders' also discussed taxation, another topic that threatens to expose transatlantic strains.
The European Commission on Wednesday proposed rules to make digital companies pay more tax, with U.S. tech giants such as Google, Facebook and Amazon set to foot a large chunk of a potential 5 billion euro ($6.1 billion)bill.
EU Economics Commissioner Pierre Moscovici brushed off accusations that he was going after rich American tech companies to enrich EU coffers and France, Germany, Italy, Britain and Spain welcomed the proposals in a joint statement.
However, some smaller countries fear the proposed tax would undermine their ability to attract multinationals and see the measure as more likely to shift tax revenue to bigger EU countries rather than raising more money. ($1 = 0.8143 euros) (Additional reporting by Gabriela Baczynska, Alastair Macdonald and Richard Lough Editing by Catherine Evans, Toni Reinhold)