US President Donald Trump addresses the “Winning the AI Race” summit in Washington, D.C. He brought us his perspective on how AI is affecting global trade. His comments pointed to tensions that remain between the U.S. and the European Union (EU) over protectionist trade policies. Trump’s high-speed negotiating style and tendency to change plans on a dime have already wreaked havoc on trade talks. Lately, his remarks have caused the EU to prepare for the possibility of a no-deal Brexit.
The future of the current trade negotiations between the US and the EU depends almost exclusively on Trump’s position. His administration’s use of the imposition of tariffs on imports from the EU has raised fears of US economic coercion. The EU is preparing a fierce counter-retaliatory response. With this, they would adopt, at least initially, a big package of counter-tariffs targeting everything from machinery to apparel. The European Commission combined two proposed duty packages into one robust adopted list. This long list is diverse and would result in tariffs on roughly $109 billion (93 billion euros) of US goods.
“In a no-deal scenario without another delay of US tariffs, I see the EU going for a tit-for-tat approach, ie imposing 30% tariffs on selected US goods, not yet all goods, like the well-known motorcycles, cars, clothing and alcohol.” – Carsten Brzeski
The EU’s response is not just a reaction — it’s a designed bargaining chip going into negotiations. The European Commission further welcomed that retaliation would only be triggered after substantial consideration of the US’s reaction to new tariffs would be necessary.
“Retaliation is seen as a negotiating tool by the EU, so the ACI will probably be activated only in a second phase if there is no response by the US after the tariff packages enter into force — the EU would want to keep it as leverage rather than using it immediately.” – Carsten Brzeski
To this end, Europe was particularly spurred by the missteps of Trump’s trade agenda into fears of economic coercion from third-country actors, especially the US. The European Commission has been careful to emphasize its capacity to formally determine cases of such coercion and act in kind.
“The instrument allows the Union to formally identify instances of economic coercion and to respond.” – European Commission
Beyond these tensions, there is a deeper richness to the way EU countries position themselves and each other in retaliating on trade. Brzeski noted that European countries would want to insist on something of a middle ground.
“Given that European countries are not fully aligned on how to react, I cannot see the EU going full in but rather trying to find a balance between showing that it reacts but without going beyond the US measures.” – Carsten Brzeski
The possible consequences of Trump’s trade policies go much deeper than just tariffs. His decisions affect not simply the direction of our economic relationships, but the foundation of our entire geopolitical dynamic. To the EU, economic coercion represents an attempt to influence or undermine its regional policies, forcing the EU to think twice about its moves.
As the situation develops, European leaders and policymakers are preparing for various outcomes while hoping for a resolution that avoids escalating tensions further. The looming deadline for new tariffs adds urgency to these discussions as both sides navigate complex negotiations in an increasingly volatile trade environment.