When Donald Trump was president for the first time, Brussels managed to avert the worst-case scenario in transatlantic trade relations – a trade war over cars.
Washington lawmakers, especially the Republican ones, and the American business community (plus its lobbyists) then created a defensive wall to prevent this. This time, however, Brussels might not be so lucky, writes Bloomberg agency. The first reason is that many of Trump’s critics are already out of Congress, primarily moderate Republican lawmakers who years ago led key committees and tried to moderate Trump’s policies.
Trump and his people, on the other hand, have had three years out of office to figure out how to proceed in the event of re-election, and it appears they will want to move quickly. In addition to the idea of imposing a basic tariff on all imports (including European), Trump has talked to aides about banning TikTok. Another chapter is the ban on the import of Chinese electric cars – or those made from Chinese parts and then assembled in other countries.
Ten percent on everything
Americans and Europeans also differ on the issue of increasing tariffs on steel and aluminum. Trump introduced them in his first term as president; they were then toned down by the Biden administration. If Trump wins in November, the European Union will undoubtedly become one of the main targets of his trade measures, according to Bloomberg (sourced from several Trump advisers).
A likely starting point in the case of a second Trump administration would be to include the EU in the mentioned minimum import tariff of ten percent, which would also apply to China. He could also introduce retaliatory measures against European taxes on digital services, implicitly aimed at US tech firms.
Bloomberg’s sources in Trump’s circle cite various possible motives for carrying out such plans. These include, for example, frustration with Europe’s reluctance to take a more aggressive approach towards China. Such an approach would could have in the form of introducing its own tariffs against Beijing or it could be aimed at limiting strategic investments by Chinese companies.
Potential measures against Europe could be one of the key components of US trade policy in general. The US has a long-term high deficit in international trade with the Union; figures so far for 2023 suggest that most likely the third year in a row will exceed 200 billion dollars. According to Trump’s advisers, their potential old boss sees in this a demonstration of unfair trade practices of the Union.
“Trump is using trade and tariffs as a negotiating tactic to get these countries to act in the interests of the US — you saw that with NATO,” said Stephen Moore, one of Trump’s informal economic advisers.
He was referring to the way Trump, in his first term, demanded that NATO allies contribute more to defense. Trump sent them the same message, even amplified, last week.
Reinforcement or retaliation?
According to Moore, the most important thing will be how Europe behaves when it comes to reducing tariffs on American products. “Given that the average European country levies a value-added tax of 15 to 20 percent, it puts us at a business disadvantage right off the bat,” said Moore, an economist at the Heritage Foundation. According to him, such tariffs directly motivate European companies to export to the USA.
But Moore also says the 10 percent tariff on US imports being considered is not a direct retaliation for the EU’s stance on any specific issue. It is simply to strengthen the long-term global position of the USA. It would also bring billions in revenue to the state coffers, which would give Washington room to cut taxes for domestic manufacturers and other entities.
Trump campaign spokesman Steven Cheung was less conciliatory, saying instead that the former president “has made it clear that he intends to use every tool at his disposal to defend American workers.” And according to him, it doesn’t matter if they are “workers in the automotive industry, steel workers, workers in technology or farmers.” In any case, Trump said, he “will not tolerate other countries stealing our jobs or targeting the destruction of our industries.”
If Trump plans something like that as retaliation, or just as “strengthening the American position”, but of course it doesn’t really matter in the end.