Trump, Tariffs, and the Future of the Transatlantic Relationship

For several weeks now, Brussels has been in unrest when it comes to the presidential elections in the United States.

Lennart Nientit is a Programme Officer at Friedrich Naumann Foundation European Dialogue.

These are steadily approaching, and according to the latest polls, former President Donald Trump is ahead of Democratic incumbent Joe Biden in 5 out of 6 swing states. As the U.S. election campaign slowly gains momentum, it becomes increasingly clear that the EU is inadequately prepared for a Republican election victory.

According to U.S. media reports, Trump is already actively putting together a strategy for a potential second term. For instance, he has announced a series of measures that he intends to implement on his first day back in office. They range from lifting job protections for undesirable government officials and restricting asylum rights at the Mexican border to challenging military aid to Ukraine.

However, the idea that is currently causing the greatest stir in the Brussels European bubble concerns future trade relations. Trump, who for several years has identified his country’s trade deficit as the main cause of many problems, wants to reorganize economic relations. He has already declared his intention to implement tariffs on all goods imported into the United States if he secures victory in the upcoming election. Despite the close transatlantic ties, the EU would not be exempt from this with tariffs potentially reaching up to 10%.

It is unclear how the European Union would react to such a confrontational act. In 2018, during his first presidency, Trump initiated a trade conflict with the EU over U.S. steel and aluminum production. At that time, he declared these industries vital for American national security, allowing him to impose tariffs of up to 25% on European imports. The conflict over the so-called “national-security tariffs” was only eased during Joe Biden’s administration but continues to linger in the background.

In Brussels, there is a reluctance to delve into the discussion on how the EU would respond to potential new tariffs. However, it is likely that the EU, similar to the situation in 2018, could respond with equivalent tariffs on U.S. goods. Back then, they primarily affected Bourbon whiskey, peanut butter, and famous U.S. brands such as the motorcycle manufacturer Harley-Davidson. In the case of a comprehensive tariff imposition as envisaged by Trump, the EU would have to respond on a larger scale, targeting key U.S. industries, such as agriculture, technology, aviation, or the automotive industry.

Overall, a renewal of the transatlantic trade conflict could have potentially dramatic consequences for both sides, as the current trade volume in goods between the two economic giants is around $870 billion annually. Nonetheless, the American trade deficit, a particularly sensitive issue, has continued to grow. By now EU countries export over $200 billion more to the U.S. than they import.

Moreover, transatlantic trade plays a crucial role in the face of pressing geopolitical challenges. Since the large-scale Russian invasion against Ukraine, the United States has established itself as one of the most important suppliers of energy resources to Europe. Today, almost 50% of all European LNG (liquefied natural gas) imports come from the United States. In addition, considering the EU’s de-risking strategy towards China, there is a heightened emphasis on the transatlantic trade relationship. Some argue that reinforcing EU-U.S. trade could be instrumental in diminishing Europe’s economic dependencies on the People’s Republic (https://www.gmfus.org/news/congressional-testimony-aligning-transatlantic-approaches-china).

For these reason, the EU would like to further deepen its economic relations with the United States (https://www.atlanticcouncil.org/blogs/new-atlanticist/eu-and-us-officials-break-down-their-deepening-trade-cooperation/). Behind closed doors in Brussels, some people still occasional dream of reviving the Transatlantic Trade and Investment Partnership (TTIP). While such a scenario is certainly desirable, it remains uncertain how realistic this prospect is in the coming years. The polls in the United States give little cause for optimism, as they seem to point the way to a more protectionist American trade policy.

In addition to specific economic policy issues, the future of transatlantic relationship is on the brink. Collaboration between the U.S. and the EU is essential amidst geopolitical challenges like Russia’s full-scale aggression against Ukraine or the rise of China. Addressing global concerns such as climate change and environmental protection require strong joint action as well. Amid numerous challenges confronting the West, preserving harmony between the U.S. and the EU becomes paramount, as the future of the entire transatlantic relationship hinges on this delicate equilibrium.