By international affairs specialist Glen Hodgson of Swedish think tank Free Trade Europa
In Lewis Carroll’s famous book “Alice’s Adventures in Wonderland” the White Rabbit offers the advice “don’t just do something, stand there.” This advice would be good for EU decision-makers to take on board regarding their global approach to tariffs, sanctions and trade.
The importance of trade
In light of the US election result and President Trump’s inauguration on 20th January there has been a great deal of hand-wringing and soul-searching in Europe, yet it is important for politicians and commentators alike to maintain a sense of perspective. Trade in goods and services between the EU and US totals EUR 1.3 trillion and the transatlantic relationship is vital for the EU economy as a whole and for sectors ranging from spirits to technology in particular. The high levels of mutual trade and investment are the lifeblood of so many industries and sectors, while the strategic partnership between the two blocs should never be underestimated as it underpins the peace, prosperity and progress that has been enjoyed on both sides of the Atlantic for the past 80 years.
🚨 TRUMP: “I told the European Union that they must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way!!!”
Babe wake up! Trump is tariffing the EU! pic.twitter.com/cAvnraFc2r
— Autism Capital 🧩 (@AutismCapital) December 20, 2024
Looking beyond the current bluster, threats and negative hyperbole, it is important that EU and US administrators and politicians take a calm and pragmatic look at the transatlantic relationship, and trade in particular. Both sides need to take a sober approach to this vital issue based on open dialogue. The EU and US also need to be committed to negotiations carried out in a spirit of collaboration that will build trust while delivering mutually beneficial outcomes.
Never a right way to do a wrong thing
It would be very easy for the European Commission – spurred on by combative rhetoric from EU Member States – to take the wrong-headed approach of deciding to fight fire with fire in light of President-elect Trump calling on tariffs of 10-20% to be slapped on imports from the EU. Yet tough-talking rhetoric, threats and recriminations would lead to a mutually-destructive arms race in tariffs and quotas. This approach needs to be avoided and the European Commission and EU Member States must instead prioritise constructive negotiations to avoid an escalation in words and actions that could trigger an EU-US trade war.
The EU can claim the positive initiative – as well as the moral high ground – by taking a stance against punitive trade tariffs. A peace offering to the incoming President and his team would be the offer to extend the suspension of tariffs on steel and aluminium. These have been frozen yet the agreement comes to an end in March 2025 and billions of Euros in extra tariffs are threatened on US imports into the EU. For their side, the US will revisit the situation at the end of 2025. As such, the EU can show good will and has the ability to set the positive lines and tone of the future EU-US partnership. This opportunity should not be missed. If these constructive steps can be coupled with a commitment to increase imports of LNG from the US, then the relationship will be sweetened further from a trade perspective. This initiative would also help the EU to meet its energy requirements while weaning the European Union off its reliance on Russian natural resources, as EU Commission President von der Leyen has highlighted.
Ukraine’s Zelensky calls for Europe to buy more US LNG to replace Russian gas
🇺🇸 🚢💸 Trump previously demanded that the EU boost American oil and gas purchases to reduce the trade deficit
🤝 Zelensky looks to be appealing to Trump on this pic.twitter.com/kghnxug1XB— Stephen Stapczynski (@SStapczynski) January 1, 2025
This peace offering would also be of huge benefit to the EU and the threat of 50% tariffs on bourbon and motorcycle imports into the EU would be in the interest of no one, whether they are businesses, consumers or politicians. At the sectoral level, it would be far more advantageous for EU and US negotiators to look towards special arrangements. To take the case of spirits, for example, an agreement should cover them since they are a special case in that they are not a commodity, they cannot be substituted given that they are distinctive products on account of their base as well as how they are distilled, stored and aged. This deal could be based on best regulatory practises, closer transatlantic coordination to improve protection for distinctive EU and US spirits around the world, and the establishment of a EU-US working group on spirits. An agreement would also create the landscape for a rich, diverse and prosperous market on both sides of the Atlantic. A mutually-beneficial arrangement would also create deeper connections as well as boost trade and investment in both the EU and US.
Open trade between the two blocs is vital and action that may disrupt this should be avoided. Sometimes doing less is better than doing more, in order to prevent a fairytale becoming a mutually-damaging nightmare.
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