The EU has a two-phase trade strategy for Donald Trump’s possible re-election.
Brussels, as reported by the FT, is willing to offer the Republican leader a quick deal if he wins a second term as president, but also targeted retaliation if he decides to pursue punitive tariffs.
EU officials see their approach “carrot and whip” as the best response to Trump’s promise to impose a minimum tariff of 10%, a quota that is estimated to reduce EU exports by around 150 billion euros per year.
European negotiators plan to reach out to Trump’s team if he wins election in November before even taking office to discuss which US products the EU could import in larger quantities.
If negotiations to improve bilateral trade terms collapse and Trump moves to higher tariffs, then the European Commission will draw up lists of imports on which it can impose tariffs of 50% or more. “We have to show that we are partner of the US, and not that we are a problem”said a senior EU official.
Bourbon and Harley
“We will seek agreements, but we are also ready to defend the EU if necessary. We will not be driven by fear.”
Trump’s first term, between 2017 and 2021, was painful for the EU, which maintains a significant trade surplus in goods with the US.
When Trump imposed tariffs on €6.4 billion worth of steel and aluminium imports from the EU (and other countries) in 2018 on national security grounds, the EU responded with €2.8 billion worth of tariffs.
When designing these measures, Brussels chose to also target them favorite products Among some of Trump’s top voters, look no further than bourbon whiskey, Harley-Davidson motorcycles and electric boats.
The activation of these tariffs has been suspended until March under a temporary agreement with the Biden administration.
Difficulties
EU Trade Commissioner Valdis Dombrovskis, speaking to the Financial Times, said he hoped the two sides would be able to avoid a repeat of the “confrontation” of the past.
The Latvian politician called for a “cooperative approach” and said Brussels was open to “specific agreements” to reduce the 156 billion euro trade deficit levels.
The US annual trade deficit widened to €152 billion in 2020, up from €114 billion in 2016 when Trump won the election, while since Russia’s invasion of Ukraine in 2022, the EU has been importing large quantities of liquefied natural gas from the US to replace supplies from Moscow.
However, the US deficit has remained stable under President Joe Biden, reaching €156 billion in 2023.
Indeed, EU officials warn that it is difficult to significantly increase US exports to the Union, as they tend to be less “valuable” than EU exports, with the EU’s main exports being pharmaceuticals, cars and expensive food and drinks such as champagne.