Trump's Tariff Threats Push Europe To Gear Up For Trade Fight

US duties could nudge EU towards protectionist measures and away from free trade

- Kim Mackrael

President-elect Donald Trump's tariff warnings are forcing Europe to confront an unwanted trade-off: Keep its own tariffs low and shoulder the economic costs, or throw up new barriers in a bid to protect vulnerable industries.

The European Union has long ardently defended the rules-based system for free trade, and last month announced a breakthrough on a giant trade deal with four South American countries. At the same time, the bloc is preparing a combination of carrots and sticks to respond to Trump's plan to use tariffs to achieve domestic and foreign policy objectives.

Europe wants to avoid an all-out trade war. The U.S. is the EU's biggest trading partner, with total two-way trade and foreign affiliate sales between the two economies valued at roughly $8.7 trillion, according to the American Chamber of Commerce to the EU.

Any U.S. move to impose global tariffs of up to 20%, as Trump has threatened, would damage Europe's already ailing economy and weigh on the bloc's exports to the U.S.

Higher U.S. tariffs on China could redirect cheap products to Europe in a double whammy for the bloc's domestic manufacturers.

EU officials hope to head off some of those threats with proposals that could include pledges to buy more American liquefied natural gas and defense supplies and an offer to team up with Trump in confronting Beijing. The bloc could also commit to shouldering more of the financial burden of supporting Ukraine, and member states could boost military spending, The Wall Street Journal has reported.

In case those overtures don't work, the EU has prepared a range of options for retaliation, which diplomats have said could include tariffs that target products from politically sensitive U.S. states. After the first Trump administration put tariffs on EU steel and aluminum in 2018, the bloc hit back with duties on classic U.S. products including bourbon and Harley-Davidson motorcycles.