CUSTOMS OFFICERS all the way!!! : EU considers carrots and sticks to counter Trump on trade | European Union

If there's one thing the EU knows about Donald Trump, it's that he loves tariffs. The new president declared tariffs to be the nicest word in the dictionary and threatened to impose them on U.S. allies around the world.

During the election campaign, he proposed tariffs of 10 to 20 percent on imports from all countries, with a rate of 60 percent reserved for China. Once elected, he tweeted that the EU needed to buy more American oil and gas, otherwise it would always be TARIFFS!!! This week, he announced that he would create a foreign revenue service on his inauguration day.

The European Commission, which directs trade policy for the 27 EU member states, has been preparing the next US president since last summer. The details of his response to potential tariffs, however, are closely guarded and depend on what the volatile new president actually does.

It is understood that the commission is adopting a dual approach, that of the carrot and the stick. The sticks are EU retaliatory tariffs, while the carrots include offers to purchase additional U.S. products. Before Trump's social media outburst, commission president Ursula von der Leyen had proposed that the EU buy more liquefied natural gas from the United States to replace the LNG it buys from Russia.

Even though the EU is well prepared, officials worry about a possible trade war. The EU and the United States traded a record 1.54 billion (1.3 billion) worth of goods and services in 2023. Commission officials describe this trade as balanced, emphasizing that the EU buys more services in the United States than it sells in return. But Trump tends to focus on trade in goods, where the United States is in deficit. They don't take our cars. They don't take our agricultural products. They sell millions and millions of cars in the United States. No, no, no, they will have to pay a heavy price, he complained during the electoral campaign last October.

A Tesla Cybertruck at the Paris Motor Show. The EU isn't taking our cars, Trump complained. Photograph: Julien de Rosa/AFP/Getty Images

Even a 10% tariff would hurt European exporters, particularly the struggling European auto industry. And if Trump follows through on his threat of 60% tariffs on Chinese goods, the EU would face political pressure to follow suit, as well as a potential glut of cheap Chinese goods on global markets , which would lower prices and harm the business of European producers.

The EU must be prepared for all eventualities, said Ignacio Garca Bercero, former director of the European Commission's Directorate-General for Trade. Also a former EU-US trade negotiator and now a member of the Bruegel think tank, he doesn't think Trump's first move will be anything as radical as 10-20% tariffs across the board, due to the very disruptive consequences for the American economy. Economists expect the tariffs to raise U.S. consumer prices and reduce household incomes and the size of the economy. At least initially, Trump's tariffs are a threat rather than something that is actually implemented, Garca Bercero said.

Chickens in Osage, Iowa. Trump wants the EU to buy more American agricultural products. Photo: Scott Olson/Getty Images

He thinks the EU's first priority should be to try to avoid tariffs, but in a document he calls for a credible threat of retaliation. In response to Trump's imposition of tariffs on European steel and aluminum in 2018, the EU retaliated by imposing duties on iconic American products such as Harley-Davidson motorcycles, bourbon and orange juice from politically sensitive Republican states.

This time, the EU faces a broader threat, potentially affecting all goods. Garca Bercero suggests that the EU opts for a negative list, that is, similar tariffs on all American products, with exemptions for products essential for European buyers, such as LNG.

EU officials have been studying the strategy adopted by former European Commission President Jean-Claude Juncker. After Trump imposed tariffs on European imports of steel and aluminum, Juncker persuaded him to drop the threat of tariffs on European cars by promising to buy soybeans and natural gas Americans, as well as by launching negotiations on trade liberalization. The commission did not have the authority to force private companies to buy U.S. soybeans, but taking advantage of a favorable market trend helped avoid punitive tariffs.

A biker at an American music and motorcycle festival in France. Photograph: Guillaume Souvant/AFP/Getty Images

Sam Lowe, a partner at business consultancy Flint Global, believes governments around the world are considering similar strategies, particularly as Europe seeks to replenish its defense stockpiles. There is a theory that we would buy all this American equipment anyway. Can't we just wrap it up and put a big number on it? And if it works, great, Lowe said. The uncertainty is whether this will be enough.

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It is unclear whether Juncker's trick can be pulled off by Von der Leyen, a German Christian Democrat in the tradition of Angela Merkel, the former German chancellor who was treated coldly by the erratic US president.

Other EU leaders have closer ties to Trump, including Italy's Giorgia Meloni and Hungary's Viktor Orbn, but it is unclear whether these Eurosceptic leaders would use privileged access to promote the EU's common interest . One of my fears is that [Trump] This leads to division within the EU and undermines a coordinated EU response by privileging certain member states with preferential treatment, Lowe said.

It is difficult to predict what the reaction would be if, for example, he threatened to impose tariffs on the entire EU, but announced that he would exempt Italy, Hungary, Austria. and the Czech Republic.

EU drinkers may have to grit their teeth and buy more Bulleit bourbon. Photograph: Ben Margot/AP

Adding to the complexity is how the EU's regulatory powers could anger Trump's acolytes. The commission has ongoing investigations into Elon Musk's X and Mark Zuckerberg's Meta, and the two tech leaders have moved closer to Maga's orbit to curry favor with Trump. On the campaign trail, Trump's new vice president, JD Vance, linked US support for NATO to the EU's treatment of X. He didn't specify what he meant, but that indicates how different issues could be linked to put pressure on Europe.

In the face of US unpredictability, the EU will seek common approaches to trade with like-minded developed countries such as Japan and the UK. Speaking to reporters in Brussels last month, British Chancellor Rachel Reeves said London would always advocate for free and open trade, but would not choose sides.

The UK is deeply reluctant to get drawn into a trade war, but it may have no choice. If negotiations with the Trump White House fail, Lowe said, and we find ourselves in a full-blown trade war scenario with the EU imposing tariffs in retaliation, I think at this point the U.K. Uni should at least think about it.

So far, the EU seems united. Just days after Trump's victory, EU27 leaders adopted a declaration pledging to implement a trade policy that defends and promotes the EU's interests. But the real test of this unity won't begin until January 20, once Trump returns to the White House.

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