Home European Union The EU can’t change Trump – But it can change itself

The EU can’t change Trump – But it can change itself

By
Pieter Cleppe
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Right after European Commission President Ursula von der Leyen finally signed the landmark free trade agreement with Latin American trading bloc Mercosur, US President Donald Trump spoiled the party, by threatening to impose a whole series of new tariffs on European countries that sent soldiers to Greenland outside NATO military command, something which Trump considered to be a provocation.

The EU’s response is to suspend approval of the EU-US trade deal agreed in July. Also under consideration are hitting the US with 93 billion euro worth of tariffs and restricting American companies from the EU’s market.

France wants the EU to also use the so-called anti-coercion instrument, nicknamed a “trade bazooka”. This was originally agreed to deal with China, which had been bullying Lithuania due to its stance on Taiwan. It was not exactly expected to be considered against the United States. Germany is wary, but has now agreed to ask the Commission to explore unleashing the Instrument.

It does not take a genius to understand the damage an all-out trade transatlantic trade war would cause. Suggestions that the EU would have some leverage over services are questionable. As Daniel Kral of Oxford Economics explains: “Excluding tax dodging transactions of US big pharma & tech, the EU runs a services trade surplus with the U.S.” Also dumping US Treasuries would be self-defeating, as the global economy ultimately runs on the U.S. dollar.

Therefore, this is likely to end in some kind of diplomatic fudge, also given Donald Trump’s track record of backtracking on all kinds of threats. European leaders are already preparing the ground. French President Macron has proposed an official Nato exercise in Greenland, with US participation, to reassure Trump on the Russian and Chinese threat to Greenland, which may well become an important shipping route in the future. EU Commission President Von der Leyen has called for EU defence funds to boost Arctic security.

In itself, it is fair for Trump to make an offer to buy Greenland. Given the right price, the inhabitants of Greenland may find this attractive. Trump also has a point that only US military power is able to secure this important geostrategic area. To however threaten NATO allies with tariffs or even military intervention is a completely different thing. It explains how a staunch Atlanticist like Belgian PM Bart De Wever sharply criticized Trump, as he stated: “now so many red lines are being crossed.” He added: “We as Europe must tell Trump: this far and no further. ‘Back down,’ or we’ll go ‘all the way. (…) A trade war would be catastrophic, but as much for the US as for Europe,” as he also noted that Trump must take into account the domestic midterm elections later this year. Also France’s rightwing populist Jordan Bardella, who has a shot at becoming new French President next year, and Nigel Farage, equally ahead in the polls in the UK, have sharply disavowed Trump on this topic.

Other European leaders, like Italy’s Giorgia Meloni have tried to downplay the matter, describing the US president’s threat as a “mistake” that resulted from a lack of “understanding and communication” over some EU capitals’ recent decision to send troops to Greenland. Also Eastern European leaders are more moderate, also due to fears of the implications of losing US support for Ukraine. The UK government appears wary to go along with EU retaliation.

When it comes to the EU’s Digital Services Act, EU protectionism against American cars or American agriculture, or the decades of underinvestment in defence, the US and its President have a point, and Trump’s brash moves have actually pushed things in the right direction here somewhat, as his announced tariffs have also been scaled down. Hopefully, the American right will understand that it is not in America’s interest to brazenly abandon core American principles like self-determination, especially in the year when the 250th anniversary of the American Republic is celebrated. At least one poll shows that almost 90 percent of Americans oppose military action to take Greenland, so even short term electoral considerations should lead to the same conclusion.

In Davos, Trump already seemed to follow the “TACO” – script once again, which stands for “Trump Always Chickens Out”, as he ruled out military action. Still, he is very keen to obtain Greenland, as he warned: “You can say yes – and we will be very appreciative. Or you can say no – and we will remember.”

Also the EU has spoiled good ties with its neighbours

Denmark refuses to even negotiate a sale. Whether Trump will therefore be forced to back down or not on his tariff threat over Greenland if he fails to convince Denmark and the inhabitants of Greenland to buy it, does ultimately not change what European countries should do. Earlier in January, Euractiv’s Eddie Wax pointed out the following: “In the space of a single day, I heard top EU politicians and officials call for sanctions against Russia, China, India, Israel, Iran and the US.”

This really says it all. A much more cordial relationship between the EU and the rest of the world is needed. Yes, the rest of the world deserves blame here, given America’s tariff wars and Russia’s actual wars, but the EU certainly also has been undermining global trade openness. It has mostly done so by abusing trade relationships and trade negotiations to try to impose its policy choices on its trading partners.

The EU’s new corporate sustainability rules, laid down in its corporate sustainability reporting (CSRD) and corporate sustainability due diligence (CS3D) directives are the most obvious example. Following an outcry, certainly from the U.S., but also EU industry, the EU has been watering those down somewhat, as it has also reduced its reporting duties and other bureaucratic requirements for companies.  

Also the new EU deforestation rules have been undermining good trade ties with the rest of the world. This new EU regulation requires exporters of cocoa, coffee, soy, palm oil, beef, and related products to demonstrate that the land used in production has not been subject to deforestation since the end of 2020. It angered Brazil and the United States, but it also badly soured the relationship between the EU and South-East Asian trading partners like Malaysia and Indonesia – economic powerhouses that should be a priority for the EU in its quest for diversifying its trading partners.

Following complaints by European businesses, another postponement of the implementation of this regulation was agreed at the end of last year, this time until the end of December 2026, as also a review clause, focusing on simplification, to be carried out by April 2026, is foreseen.

Last year, US President Trump managed to secure a partial exemption for American products, but countries like Indonesia and Malaysia, which are great exporters of palm oil, want the same. Malaysia thereby considers it particularly unfair that its imports are classified by the EU as ‘standard risk’, as opposed to the American classification of ‘low risk’, given that Malaysian deforestation has improved significantly, with NGOs acknowledging a reduction of 13 per cent in 2024. Malaysia only lost 0.56% of its remaining primary forest in 2024, according to Global Forest Watch. That is less than Sweden’s 0.87% loss.

Sabine Weyand, the European Commission’s Director General for Trade,  remarked herself in 2024 that trading partners were increasingly questioning EU’s use of trade policy to act as a “global regulator”, as she stated: “The Global South and the emerging and developing economies, they do not simply want to copy our legislation and they say, who has appointed you world regulator?

Still, a real change of course is not yet visible. The EU is not only watering down green bureaucratic trade barriers, it is also throwing up new green protectionism. At the beginning of January, its controversial “Carbon Border Adjustment Mechanism” (CBAM) went into force. Thereby, tariffs are imposed on trading partners that do not follow the EU’s suicidal climate policy, as well as a lot of bureaucracy, even for European companies

Also here, the U.S. has managed to secure concessions, which led to a demand by South Africa to also be exempted, given the cost to African economies as a result of CBAM. Also within the EU, there is fierce opposition. France and Italy want fertiliser to be exempted, which causes fears that the CBAM scheme will be further dismantled, after it was already watered down somewhat last year. At some point, European industry may perhaps start demanding to scrap the original rationale for CBAM, which are the EU’s costly climate policies, starting with the climate taxation scheme ETS which is keeping EU energy prices artificially high.

Going forward

Apart from no longer bullying its trading partners, the EU should also aim to close more trade deals. It is making some efforts here, and secured some success with the closure of the EU-Mercosur deal and before that the EU-Indonesia deal. At the moment, a key priority is to close a trade deal with India. Also here, CBAM is a major impediment, as India has been complaining about it a lot.

Meanwhile, however, a vote in the European Parliament to request a judicial review of the EU-Mercosur deal goes counter the aspiration for the EU to diversity and open up its international trade. This blunt attempt to postpone the implementation of the deal which has been under negotiation for about 25 years may however fail. The EU treaties do allow for the possibility of provisional implementation of the EU-Mercosur trade deal, according to the European Commission, and the German government is among the ones pushing to do this. Still, Mercosur countries need to ratify the agreement first, however.

European farmers that are opposed to the deal surely have a point that the EU’s many burdensome agricultural regulations they are subject to for the most part do not apply to their competitors outside of the EU. In return for the provisional application of the Mercosur deal, farmers should therefore be granted a comprehensive round of deregulation. That would combine the benefits of greater trade openness with support for Europe’s farming businesses. The EU can blame Trump for shaking up trade relationships, but if it cares so much about trade, it should get its own act together first.

 

 

 

 

 

 

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