Could Europe Implement Countermeasures Against American Tariffs?

The European Union (EU) is preparing for negotiations with the United States, aiming to maintain a balanced and resilient relationship. The EU's strategy is multifaceted, involving not only dialogue but also the implementation of various deterrence mechanisms to defend its interests.

Nathalie Dezeure, Head of Macro & Financial Institutions Research, believes that the EU is in a favourable position to negotiate trade issues with both the United States and China. This optimism stems from the EU's strong market, rapidly growing trade, and a network of strengthened trade agreements.

The EU has been bolstering its negotiating position over the past two years with instruments such as the Anti-Coercion Instrument (ACI), the Foreign Subsidies Regulation (FSR), and the International Procurement Instrument (IPI). These tools are designed to level the playing field and ensure fair competition.

The EU's focus on economic resilience is central to its strategy. In the event of failed negotiations, an emergency aid plan will be necessary to support vulnerable sectors and contribute to the economic resilience of the EU. The EU, with a market of 450 million inhabitants, seems capable of providing a firm response to the United States.

In the short term, the EU's ability to speak with one voice on the global stage gives it a strong position in international trade. During the second term of Donald Trump, the European Commission under Ursula von der Leyen led the EU's negotiations and agreements with the US, resulting in a 2025 trade deal that sets most US tariffs on EU imports at 15 percent.

However, the main risk to the EU's response may come from some member states showing a desire for restraint in their response. The strategic response of the EU also involves the revival of the competitiveness of the European single market through an integrated industrial policy.

In the long term, the EU's focus on economic resilience is part of its strategy for reducing dependence on the United States and China. This strategic response also involves diversifying trade to reduce dependence on these two economic powers. Deteriorated trade relations between the EU and the United States would be detrimental to both parties, but more so for the United States, particularly the manufactured goods sector.

An analysis of value-added trade somewhat mitigates this data, depending on the sectors. The United States relies on the European Union for 18.3% of its trade in goods, compared to 6.7% for the EU. This underscores the importance of maintaining a cooperative and balanced relationship between the two economic giants.

The EU's strategy for negotiating with the United States also involves establishing a common response to unilateral (aggressive) measures. By working together, the EU hopes to maintain a diversified trade portfolio and ensure fair trade practices for all parties involved.