As Europe is waiting for President Donald Trump’s tariffs, the European Union doesn’t necessarily have to lie down and take it.
Some say Donald Trump only cares about optics. As long as he looks good, he will accept any deal. If you accept that idea, it is essentially a discussion to continue to underestimate him, and it hasn’t worked that well in the past. In particular, it would be a foolish misjudgment to equate and extrapolate the relationship between America, Mexico and Canada with the EU.
Here’s how Europe can respond more effectively than simple retaliation: The most aggressive and potentially most effective response is for the EU to revive the Chinese investment agreement between Angela Merkel and Emmanuel Macron for five years, reaffirming the strategic partnership between the EU and China. It will probably produce a bit of noise on the other side of the Atlantic Ocean and almost certainly bring about a greater threat. If Trump chooses to escalate, it should probably help ASML find business opportunities in China. Perhaps as a Quid Pro to help us with our behind-the-scary 5G infrastructure. Cooperative agreements could expand into AI, an area that Europe has sadly ignored.
A very positive but highly effective response in the long run is filling in the blanks opened by rewinding some USAID programs. As long as the US withdraws from international organizations, the EU has been able to strengthen its involvement and form new strategic partnerships, particularly in Africa and Latin America.
Internally, the most important response is to address deep causes of dependence on the US, such as reliance on the US military for our safety. Perhaps we need to switch from massive automobile production to tanks and military aircraft production. European orders require that more efficiency be increased through reduced number of weapons systems and pooling defence purchases.
The surplus of commercial trade with the US reflects the imbalance of domestic savings for investment. The Capital Markets Union is a 10 proverbs list for EU politicians to add to the list. Place it on top of Ukraine above the Green Deal. Without it, you don’t have enough money to go around for anything.
It will curb the European high-tech sector, but will maintain the current intrusion regime of imported technology services and provide incentives for global high-tech companies to comply with European laws. Switch from data protection to data security. The overall point is that there is a menu of effective responses, but they all require a unification and a little guing.
The worst thing is, unfortunately, I expect it to happen, but the trade war will be tough. The EU can’t win that. Don’t repeat the mistakes caused by Brexit Doomsayers that predicted that the UK would end up with a huge black hole. The most common thing to lose in the trade war is the surplus countries.
One lesson from the great military strategists of history is to do your own thing, not to engage in the war of the other party. Don’t fall for Trump’s provocation. As I believe, if tariffs are wrong for the US, they are wrong for Europe too. You need to play your own game.
This is an edited version of an article originally featured in the EuroWintelligence newsletter.
