The European Union is preparing for potential trade challenges, particularly with the US under President Trump, who may reintroduce tariffs. Learning from past conflicts, the EU has established measures to counteract political pressures. Additionally, tensions with China have led to compensatory tariffs on electric cars, prompting the EU to seek new trade partnerships, especially in Latin America. EU Commission President Ursula von der Leyen is actively pursuing agreements to enhance the EU’s geopolitical influence amid these challenges.
EU’s Strategic Preparation for Trade Challenges
The European Union is gearing up for the challenges that the upcoming year may bring, particularly concerning its key trading allies. With a sense of readiness, Europe is poised to bolster the profile of its most influential leader.
The Tariff Tensions and Trump’s Impact
Donald Trump’s fondness for the term ‘tariffs’ presents significant hurdles for the EU. In a recent NBC News interview, the newly elected US president referred to tariffs as a powerful instrument to achieve not just economic objectives but broader goals as well.
This perspective has raised alarms in Brussels, where officials worry that Trump may impose increased tariffs on EU imports following his inauguration, reminiscent of his previous administration’s actions.
The fear of repeating past tariff conflicts is palpable. Back in 2018, the US introduced tariffs on steel and aluminum, citing national security concerns. The EU retaliated with its own tariffs on American goods, including iconic products such as Harley-Davidson motorcycles and bourbon whiskey, escalating tensions over subsidies involving Airbus and Boeing.
In 2024, Trump expressed concern over the significant trade imbalance, with Europe exporting nearly 150 billion euros more to the US than it imports. He has voiced feelings of being taken advantage of, especially targeting the German automotive sector, which relies heavily on suppliers across Europe. Although he threatened auto tariffs during his first term, they never materialized.
With potential policy changes, including reductions in aid to Ukraine and tariffs on EU goods looming, the EU must strategically reposition itself.
Is the EU Better Prepared This Time?
Regardless of what lies ahead, the EU is reportedly in a stronger position than before, according to Bernd Lange, the chairman of the Trade Committee in the EU Parliament. Lange highlights a task force established by the EU Commission that is actively developing comprehensive measures.
“With new legislation, we can better counter any political pressure stemming from tariffs,” Lange stated. The EU has learned from past experiences, equipping itself with tools to respond more swiftly and effectively to coercive actions.
Recent regulations now allow for significant measures in serious situations, including limiting imports and exports of goods and services, suspending patents, halting foreign direct investments, and restricting access to public contracts for non-EU companies.
Trade expert Hinz from the Kiel Institute for the World Economy remains optimistic about the EU’s approach to electric car tariffs.
From an economic standpoint, igniting a new transatlantic tariff dispute seems counterproductive. Last year, the US was the largest buyer of EU goods and the second-largest supplier of products to Europe, following China.
Brussels and Washington share common objectives, as noted by Gabriel Felbermayr, director of the Austrian Institute for Economic Research. Both regions aim to protect their steel industries from unfair competition and foster green technologies.
Felbermayr believes that despite the potential for conflict, there remains ample opportunity for collaborative development with the US, even under Trump’s leadership, who has previously demonstrated a willingness to negotiate.
The Search for New Trade Partnerships
Meanwhile, the EU is facing escalating tensions with its second-largest trading partner, China. In late October, the EU imposed compensatory tariffs on electric cars imported from China, although discussions for a resolution are ongoing. The EU accuses Beijing of unfair competition through substantial subsidies and aims to reduce its dependency on the Chinese market.
To achieve this, Europe is actively seeking new partners and raw material suppliers, particularly in regions like Latin America, where China has outpaced the EU as the primary trading partner.
On St. Nicholas Day, EU Commission President Ursula von der Leyen finalized a free trade agreement with four South American Mercosur countries after nearly 25 years of negotiations, characterizing it as a necessary political step and a clear response to rising isolationist trends.
Von der Leyen’s efforts to secure trade agreements with non-EU nations highlight her commitment to strengthening the EU’s geopolitical influence, even amid challenges stemming from government crises in major member states. Her actions, including the electric car tariffs and the Mercosur agreement, have reinforced her authority within the EU and demonstrated her ambition to position the Commission as a significant geopolitical player.