What went wrong in Europe’s trade gamble with Trump
The EU’s burgeoning deal with the Trump administration seems to escape the harshest US tariff threats. But there is a sense that the bloc has fumbled its hand, despite holding decent cards. The EU needs to examine what went wrong and how it can better secure its future interests against great powers
Problem
The White House recently moved the trigger for President Donald Trump’s “Liberation Day” tariffs from July 9th to August 1st, after striking just three trade “deals” to date (with China, the UK and Vietnam). While a range of countries received notice that steep tariffs would kick in then, the European Union was not among them—bilateral negotiations should conclude shortly. However, in April the bloc entered this trade war with decent cards and confidence; now it seems to have fumbled its hand.
First, this is because Europe had no clear plan. EU ministers drew a firm red line in rejecting a UK-style deal, leaving tariffs in place—only to likely agree to an even worse deal weeks later. A previous ECFR commentary sketched out how Europe could adopt a phased strategy which shifts tactically between three negotiating stages. But it never appeared. In the end, disunity among EU member states regarding Europe’s negotiation strategy was rife, burying any chance of implementing a plan.
Second, the EU should have immediately retaliated against US tariffs. While the mantra “negotiate from a position of strength” was oft-repeated in speeches, any associated actions never materialised. Instead, Europe was dragged into a concession-only negotiation; but China skilfully playing its hand should have demonstrated that “escalate to de-escalate” is a better strategy. A recent ECFR policy brief outlines the many options that Europe could have considered.
Third, the EU could not change its mindset about the challenge at hand. It approached these talks as routine trade negotiations: slow, detailed and technocratic. The US, meanwhile, viewed them as terms of surrender. The US-China talks in London offer a glimpse into Europe’s future: economic arms control treaties demand quite a different style of diplomacy.
Solution
Perhaps the greatest lesson of the past 90 days is that the US and China build leverage at any cost. They take economic hostages to boost bargaining power. Europe is clearly uncomfortable in this world of leverage and deterrence. But sitting idly by, hoping that the great powers will find the light back to the promised rulebook, is no solution either.
At minimum, the EU could have immediately implemented its agreed €21bn steel and aluminium tariff response. Better yet, activating the anti-coercion instrument early on—without necessarily using it—would have strengthened Europe’s bargaining power.
The lesson is that the EU should invest in updating its economic security strategy by explicitly identifying, ringfencing and shoring up economic leverage points; followed by an assessment of whether it is up to the task of using leverage proactively and offensively (it’s not) and what gaps it needs to fill. Finally, the EU’s institutional set-up needs to be updated in the face of Europe’s reality. This is a world in which economic coercion, deterrence and leverage will play ever greater roles as international rules languish.
Context
Washington and Brussels are closing in on an agreement-in-principle, which would likely leave most of America’s recently added tariffs in place while talks continue. While the EU had been more forceful about communicating its “red lines” in earlier phases of talks, rhetoric shifted in recent weeks.
Some EU member states, such as Germany, are pushing the European Commission to conclude a deal with Washington quickly, especially since German automotive exports to the US have contracted sharply. Others are more hesitant, fearing imbalanced outcomes.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.
