The European Union (EU) has stood up the Trump Administration’s unilateralism and protectionism in the escalating trade war with the United States. They stress that they are absolutely committed to responding to each and every one of the new tariff increases levied by the US Executive. Their comments come amidst a sharp increase in trade disputes. EU officials are eager to highlight the significance of their trading relationship with the US and are poised to act if and when appropriate.
Ursula von der Leyen, the European Commission’s executive head, insisted that the EU had not provoked the ongoing conflict. She pointed to Europe’s long-standing position as the largest purchaser of US exports. In fact, the trade volume between the two opposing economies set a historical record of a whopping $1.5 trillion. Last year, the EU returned to being the EU’s largest single market for US goods exports. It beat out not only Canada, but Mexico. Our second-largest trade relationship directly supports about one million American jobs.
In her state of the union address earlier this month, von der Leyen stressed how vital that US-EU trading relationship is. “The whole trade volume between us is $1.5 trillion,” she noted, underscoring the interconnectedness of the two markets. Furthermore, the EU is one of the most important sources of imported goods for the United States. Pharmaceuticals, cars, and a whole host of other consumer goods are some key examples.
The EU was the first to retaliate against Donald Trump’s new steel and aluminum tariffs. They announced retaliatory measures targeted specifically at American products totaling as much as €26 billion ($28 billion). This list contained tariffs on various consumer goods including yachts, whiskey and motorcycles. Von der Leyen made it clear that while the EU does not wish to escalate tensions further, they are prepared to act decisively if required.
“We do not necessarily want to retaliate but, if it is necessary, we have a strong plan to retaliate and we will use it.” – Ursula von der Leyen
The EU’s strategy seems to be influenced by the enormous EU leverage in many areas, notably in international trade and technology. Von der Leyen remarked on this strength, stating, “We will approach these negotiations from a position of strength. Europe holds a lot of cards, from trade to technology to the size of our market.” This language belies both the strength of the EU’s negotiating position and its belief that it can negotiate from that position.
Further, von der Leyen doubled down on the EU’s willingness to negotiate with the US. She emphasized that all possible measures are still possible if the situation continues to escalate even further. “This strength is built on our readiness to take firm countermeasures if necessary,” she emphasized.
Under President Trump, the US has entered an aggressive, unilateral, and particularly bold policy toward trade. Just last week, the administration decided to raise the tariffs even further on all steel, aluminum, and automobile imports. Unfortunately, this aggressive stance has alarmed many of our international partners. Consequently, countries hit by these tariffs have imposed retaliatory tariffs of their own. The chronic discord has put huge strain on his country’s relations with important allies, including Canada. Former Prime Minister Justin Trudeau and Trump had a famously fraught relationship.
As these trade negotiations continue, we hope the EU continues to keep its guard up against damage and threat from US policies. It sounds unlikely, but the union’s leaders do seem determined to protect their economic interests while charting their way through dangerous waters of international politics.
Given the current friction, it would be easy to assume that both sides are better off avoiding further discussion. That trading partnership, between the United States and the European Union, is enormously economically significant. It is further vitally important to global trade’s competitive landscape.
