Newsletter

How should the EU respond to Trump's tariffs?

Publishing date
16 December 2024
Authors
André Sapir
newsletter
title

During his first presidency, Donald Trump imposed additional tariffs of 25 percent on a large range of goods from China, and 25 percent on steel and 10 percent on aluminium products from all trading partners, except Canada and Mexico, but including the European Union.

President-elect Trump is now threatening to double down. His new administration might increase US tariffs to 60 percent on (potentially all) imports from China and 10 to 20 percent on (potentially all) imports from other trading partners, including the EU. This would not only negatively affect EU exports but also undermine the rule-based multilateral trading system, which the EU strongly (and rightly) supports.

The EU should respond in three complementary ways.

It should engage bilaterally with the US to seek avoiding the imposition of tariffs. It could offer to consider measures on facilitation of bilateral trade and on economic security cooperation which are consistent with the principles of the World Trade Organization (WTO). This offer should be backed up with a credible threat of retaliation that could be implemented if the US decides to impose tariffs on EU exports. Retaliation could take the form of a negative list, with the EU increasing its tariffs on all US exports to the same level as the US tariffs, except on products that are crucial for the EU.

The EU should also act to preserve a functioning rule-based multilateral trading system. It should build a coalition of like-minded countries including key players from the Global North and the Global South ready not only to uphold but also to reform the WTO.

Finally, the EU should expand its network of bilateral and regional preferential trade agreements. The priority should be the ratification of the agreement with Mercosur, but the EU should also look to improve trade relations with the United Kingdom and Switzerland and to further strengthen partnerships in the Indo-Pacific region, and with Africa.

Read the Policy brief, ‘How the European Union should respond to Trump’s tariffs’ by Ignacio García Bercero, Petros C. Mavroidis and André Sapir.

The Why Axis is a weekly newsletter distributed by Bruegel, bringing you the latest research on European economic policy. 

Sign up for the newsletter. 

About the authors

  • André Sapir

    André Sapir, a Belgian citizen, is a Senior fellow at Bruegel. He is also University Professor at the Université libre de Bruxelles (ULB) and Research fellow of the London-based Centre for Economic Policy Research.

    Between 1990 and 2004, he worked for the European Commission, first as Economic Advisor to the Director-General for Economic and Financial Affairs, and then as Principal Economic Advisor to President Prodi, also heading his Economic Advisory Group. In 2004, he published 'An Agenda for a Growing Europe', a report to the president of the Commission by a group of independent experts that is known as the Sapir report. After leaving the Commission, he first served as External Member of President Barroso’s Economic Advisory Group and then as Member of the General Board (and Chair of the Advisory Scientific Committee) of the European Systemic Risk Board based at the European Central Bank in Frankfurt.

    André has written extensively on European integration, international trade and globalisation. He holds a PhD in economics from the Johns Hopkins University in Baltimore, where he worked under the supervision of Béla Balassa. He was elected Member of the Academia Europaea and of the Royal Academy of Belgium for Science and the Arts.

Related content