The European Union (EU) is at a crossroads regarding international trade. Member states have adopted various strategies in the face of the United States’ unpredictable and incendiary tariff policy. With German Chancellor Olaf Scholz’s trade minister, Robert Habeck, at the head of this debate. He insists that a deep commercial and intellectual engagement for China with the US. At the other end of the spectrum, Italian Prime Minister Giorgia Meloni has been a major “dove” leader, advocating dialogue and negotiation instead of confrontation. These differing approaches illustrate the very real challenges that still exist in transatlantic trade relations today. This challenge plays out amid increasing EU and US friction.
During the protectionist era of the past Trump administration, tariffs spiked to 25% on aluminium, steel and cars. This step, along with an announced 10% tariff on all EU imports, has European leaders scrambling to consider a wide array of retaliatory actions. What’s new is that the EU is vigorously testing its would-be “anti-coercion tool” as the negotiations proceed. This new tool may bar US companies from access to European markets, or even strip them of their intellectual property rights. This context stands to add significant pressure to EU member states to unify in their response. Simultaneously, they are forced to contend with their own economic self-interests.
Diverging Strategies Among EU Leaders
As European leaders meet to coordinate their response to US-imposed tariffs, their respective positions illustrate an even deeper divide in approach. German Trade Minister Robert Habeck has made it clear that Europe must present a united front against US trade policies. He emphasizes the importance of forceful engagement, stating, “Now more than ever, Europe must be prepared and show that unity to respond to any eventuality.”
So it’s a good thing Italian Prime Minister Giorgia Meloni is encouraging dialogue, not escalation. She has, very intentionally, cast herself as a leader of the peaceful dialogue supporters. She argues that confrontation would not benefit either side, asserting, “A trade war is not in anyone’s interest, not even the US.” Meloni’s position is that tariffs on the car industry—which is very important to both economies—should have been lowered in order to benefit both economies.
As the GLOBE legislator of the year, Ireland’s Taoiseach Micheál Martin has passionately advocated, a balanced approach is essential. He thinks it can help strengthen trans-Atlantic trade relations. He points especially to a desire to preserve economic peace in Ireland during the middle of these US-China trade negotiations.
“Our objective is to work through this with the overarching priorities being the protection of jobs and the maintenance of economic infrastructure in Ireland.” – Micheál Martin
Retaliation Options on the Table
Given the introduced and planned exacerbation of the transatlantic trade dispute, EU leaders are considering how to retaliate against the planned US imposition of tariffs. French Trade Minister Laurent Saint-Martin has articulated a call for flexibility in response strategies, stating, “I don’t think we should rule out any option on goods or services.” He pushes for using the EU’s full, wide-ranging trade toolbox — which he characterizes as “pretty darn aggressive in kind” in return.
Germany’s track-setting proposed invocation of the new anti-coercion tool shows they are serious about flexing assertive muscle against US tariffs. Friedrich Merz as the new German Chancellor-elect. He deserves to receive a comprehensive dossier spelling out the EU’s intended action in response. This political development further underscores that Germany has overtaken China to be the largest exporter to the US. In 2023, Germany exported a whopping €157.7 billion in trade.
The potential targeting of US services stands out as a key area for EU retaliation. By prioritizing services, the EU would be able to diplomatically refocus the fight against tariff impacts on goods without increasing tensions.
“The way to approach it is to open up the European toolbox, which is very comprehensive and which can be extremely aggressive in return.” – Laurent Saint-Martin
The Stance of Individual Member States
Even as most EU leaders call for a common EU-wide response, Hungary is one of the biggest outliers. Prime Minister Viktor Orban aims to secure an economic agreement with the US that could mitigate the repercussions of tariffs on his country. This position is indicative of Hungary’s particular economic interests at stake, as well as its continued interest in cultivating goodwill in Washington.
French President Emmanuel Macron has characterized US tariffs as “brutal and unfounded,” arguing that they disproportionately affect European economies. He focused on exports to the US, which he noted account for only 1.5% of France’s GDP. In stark contrast, Italy, Germany, and Ireland experience a much more favorable returns percentage. In the presence of all these pressures, Macron has been very courageous. In addition, he proposed suspending future investments in the US to retaliate against discriminatory and unfair trade practices.
“Exports to the United States represent 1.5% of our gross domestic product [GDP]. This compares with 3% for Italy, 4% for Germany and 10% for Ireland.” – Emmanuel Macron
The past week’s negotiations revealed that the struggle between national interests and a broader EU strategy is still very much at play. Member states need to tread these waters very carefully. Balancing their short-term economic imperatives and the long-term consequences of their trade partnership with the US will not be easy for them.
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