Specter of Trump’s return forces the EU to get real on trade

BRUSSELS — Fool me once, shame on you. Fool me twice, shame on me. 
Donald Trump’s first presidency inflicted serious damage on the European Union’s free-trade agenda. With the Republican challenger threatening to get even tougher if he wins a second term as U.S. president, Brussels isn’t taking any chances.
“I know the European Union very well. They take great advantage of the United States in trade, as you know,” Trump said in a conversation last week with Elon Musk, the owner of social platform X. “They’re not as tough as China, but they’re bad.”
Should the real estate mogul return to the White House, Brussels knows it will be on its own — be it on trade, defense or climate policy. The bloc has doubled down on investments in industrial champions and now wants to protect its sensitive technologies from rivals — and both trends are only likely to accelerate in the next mandate.
Anticipating trouble ahead, Ursula von der Leyen circled the wagons in her successful pitch last month for a second term as president of the European Commission, the executive body that sets trade policy for the 27-nation bloc and its market of 450 million consumers.
Von der Leyen’s economic foreign policy blueprint relegates trade to second place behind economic security. Sealing trade deals, worn like badges of honor until recently, will no longer dominate the EU’s game — marking a huge shift from the direction she set five years ago at the start of her first mandate.
Gone is the “strong, open and fair trade agenda” that the EU would project on the world stage. Instead, trade is set to serve as ammunition in the war against the “weaponization of economic dependencies.”
“Protectionist trends will clearly be worse under a second Trump term,” said John Clarke, until recently a top Commission trade negotiator and a former head of the EU delegation to the World Trade Organization.  
The late entry by Vice President Kamala Harris into the U.S. presidential race — she now leads Trump in three key swing states — has revived Democrat hopes that they can hold onto the White House. Although her tone would not be as adversarial as Trump 2.0, diplomats and officials in Brussels say Washington wouldn’t be a pushover on trade if she wins.
The EU tried — albeit without success — to take advantage of the détente with the Joe Biden administration to fix some lingering trade disputes, be they on steel and aluminum tariffs or on reviving the highest court of the World Trade Organization (WTO).  
But new rifts opened, such as on electric vehicles or raw materials.
“Whether it’s Trump or Harris — and let’s hope to God it’s Harris and the Democrats — the U.S. priority is going to remain economic security, domestic competitiveness and industrialization, as it is likely to be the case for Europe,” Clarke added. 
Trump’s former top trade official Robert Lighthizer has made no secret that Washington will come for the EU should his former boss be re-elected. 
Lighthizer, who labeled China as America’s “greatest geopolitical threat” in his 2023 book “No Trade is Free,” also warned against the “wildly unbalanced” trade relationship with the EU, taking aim in particular at German Chancellor Olaf Scholz’s “shortsighted China-friendly policy.”
The EU posted a trade surplus in goods with the U.S. of €156 billion last year, against a deficit in services of €104 billion.
Trump has threatened to impose a 10 percent baseline duty on all imports — which economists say would hurt Europe more than the U.S. because its exporters are more susceptible to the uncertainty that a trade conflict would cause. He doubled down on that threat last week, floating import tariffs of up to 20 percent.
Still bearing the scars of Trump’s first tenure, the EU insists it won’t be caught off guard this time. It’s been boosting its trade defense arsenal for years.
But at the dawn of her new mandate, von der Leyen is still grappling with how to fortify the bloc’s citadel to ward off economic bullies.
The new concept of “economic security,” which takes a page from the U.S. and Japanese playbooks, seeks to protect the EU’s critical technologies such as semiconductors and AI from falling into the hands of China and Russia.
But more than a year after it was launched, the strategy is still in shambles, hobbled by pushback from EU countries wary of a Commission power grab to take more sway away from national capitals.
“It’s been all about protecting,” said one EU official, who was granted anonymity to discuss future plans of the European Commission. 
“There will be a tension between economic security and trade files. Economic security will take most of the trade policy, so how do you reconcile the two?” 
With less than three months to go until Americans head to the polls, the EU will need to get its ducks in a row. 
No matter who becomes the next U.S. president, lingering transatlantic disputes are around the corner. These include addressing far-reaching tariffs against European steel and aluminum dating back to 2018, when Trump imposed tariffs for reasons of national security.
Efforts to land a deal on the tariffs with the Biden administration ended in a spectacular flop at a high-level summit last October. There’s another stress test in the works, after Brussels committed to shelve its retaliatory tariffs until March 2025 — just two months after the next U.S. president gets sworn in. 
A truce in another dispute into subsidies of aircraft rivals, Boeing and Airbus, is due to lapse in 2026.
The EU’s trade dealmaking reached a tipping point in 2016 when talks on a mega-deal between Brussels and Washington collapsed amid intense public scrutiny and fears that chlorinated chicken would flood the EU market. 
Trump then dealt another blow to the rules-based trade order by blocking the appointment of new judges to the WTO’s top appeals court. Biden has taken no action to unblock those appointments, leaving the appeals court paralyzed. Nor has he shown much inclination to revive the WTO reform agenda.
“The free-trade ideology, based on this Washington Consensus, cutting all tariffs, is an illusion. This consensus is really dead,” Bernd Lange told POLITICO. Chair of the European Parliament’s trade committee, Lange was referring to the pro-market, pro-trade ideology that gained the high ground as the Cold War came to an end.
The EU’s overconfidence in free trade also blinded it to the threat that China’s drive to dominate export markets would erode the continent’s industrial base and, eventually, its capacity to innovate.
A case in point is the EU’s anti-subsidy investigation into Chinese electric cars, in which it has imposed additional duties of up to 37 percent. It should be a clear answer to China’s state-sponsored mercantilism; but attempts by Germany and Hungary to undermine the Commission’s tougher line show just how politically charged EU trade policy has become.
Over the last five years, the EU’s talks on trade deals with its allies have repeatedly stumbled — or broken down entirely. Although even if von der Leyen didn’t mention trade deals in her policy guidelines, that doesn’t mean they’re off the table entirely — like a deal with the Latin American Mercosur bloc that has been decades in the making. 
Referring to how sensitive these talks are for countries like France, Austria and Ireland, Elvire Fabry — a senior research fellow at the Jacques Delors Institute in Paris — said that von der Leyen will probably “support ratification — but there’s just no reason to shed light on this at the moment.”
However faint, there might still be hope for free traders.
Carlo Martuscelli contributed reporting. This story has been updated.