2024-07-30 03:53:38
The EU has a two-stage trade strategy for the possible re-election of Donald Trump.
Brussels, as reported by the FT, is ready to offer the Republican leader a quick deal if he wins a second term as president but also targeted retaliation if he chooses to go ahead with punitive tariffs.
EU officials see his approach “carrot and whip” as the best response to Trump’s promise to impose a minimum tariff of 10 percent, a quota estimated to cut EU exports by around €150 billion a year.
European negotiators plan to reach out to the Trump team if he wins the election in November before even taking office to discuss which US products the EU could import in larger quantities.
In the event that talks to improve bilateral trade terms collapse and Trump moves to higher tariffs, then the European Commission will draw up lists of imports on which it could impose tariffs of 50% or more. “We have to show that we are partner of the US, and not that we are a problem”a senior EU official said.
Bourbon and Harley
“We will look for agreements, but we are also ready to defend the EU if necessary. We will not be driven by fear.”
Trump’s first term between 2017 and 2021 has been painful for the EU, which maintains a significant trade surplus in goods with the US.
When Trump imposed tariffs on €6.4 billion worth of steel and aluminum imports from the EU (and elsewhere) in 2018 on national security grounds, the EU responded with €2.8 billion worth of tariffs.
When planning those measures, Brussels chose to target them as well favorite products of some of Trump’s core voter groups, see bourbon whiskey, Harley-Davidson motorcycles and electric boats.
The activation of these tariffs has been suspended until March as part of a temporary agreement with the Biden administration.
Difficulties
Valdis Dombrovskis, EU Trade Commissioner, in statements to the Financial Times says that he hopes the two sides can avoid a repeat of the “confrontation” of the past.
The Latvian politician called for a “cooperative approach” and said Brussels was open to “targeted agreements” to reduce the levels of the 156 billion euro trade deficit.
The annual US trade deficit widened to €152 billion in 2020 from €114 billion in 2016 when Trump won the election while since Russia’s invasion of Ukraine in 2022, the EU has been importing large quantities of US liquefied natural gas for to replace supplies from Moscow.
However, the US deficit has remained stable under President Joe Biden, reaching €156 billion in 2023.
Indeed, EU officials warn that it is difficult to significantly increase US exports to the Union, as they tend to be less “valuable” than EU exports, with the EU’s top exports being pharmaceuticals, cars and expensive food and drinks, such as champagne.