Since Donald Trump intensified his presidential campaign leading up to his recent inauguration, a few words have become increasingly prevalent in public discourse. One of those words is certainly "tariffs" as the new US president mentions them in nearly every public address. This is not a major novelty, as he also spoke about trade barriers in his first term and implemented some of them during his four years in office.
Before Trump's rise, there was a relatively stable three-decade consensus on free trade, with both US parties promoting free trade agreements, reducing trade barriers, and highlighting the benefits of globalisation for consumers. However, the deindustrialisation of key American regions and growing dissatisfaction with globalisation among some citizens created critical support for Trump's protectionist policies.
In his new term, the Republican leader has announced tariffs not only on China but also on the European Union, Canada, and Mexico, as well as an increase in tariffs on goods from the rest of the world.
The question now is whether the European Union will suffer the most, considering that several key member states are currently experiencing political instability.
"From America's perspective, the EU treats us very, very unfairly, very badly", Trump said in a virtual address to the World Economic Forum in Davos, Switzerland. In previous statements on this topic, he has pointed to specific areas where he believes this imbalance exists, particularly regarding tariffs on American goods.
From the perspective of the new administration, the EU is criticised for imposing high tariffs on American products, especially agricultural goods and automobiles, whereas the reverse is not the case. In addition, Trump often argues that while the US has a trade deficit with certain European countries, European allies take America's military protection for granted.
Tariffs Could Disrupt Supply Chains
Overall, in 2023, the European Union had a trade surplus of around $150 billion with the United States, while in defence spending, the imbalance stood at 66% to 33%. In 2024, European NATO members collectively spent half as much on defence as the US alone, which Washington perceives as free-riding.
Although about two-thirds of European NATO members have met the 2% GDP target for defence spending, Trump now proposes raising this threshold to 5% to balance transatlantic relations. This appears highly unrealistic under current circumstances, making a trade war seem increasingly likely.
This approach could reignite tensions similar to those caused by Trump's 25% tariffs on EU steel and aluminium during his first term in 2018. At the time, the EU responded swiftly with retaliatory tariffs on iconic American products such as bourbon and motorcycles.
In response to new US tariffs, the EU could take a firmer stance, potentially introducing countermeasures targeting politically sensitive American exports. While Trump's "America First" doctrine aims to stimulate domestic production, an escalation of tariff exchanges could disrupt global supply chains and strain economic relations between these historically close allies.
Both sides have much to lose, with bilateral trade valued at nearly $1 trillion annually. A prolonged trade conflict could not only harm key industries on both sides but also weaken transatlantic unity at a time when geopolitical challenges, such as China's economic rise, demand closer cooperation.
Less Likely: Deep Economic Hostility
However, Trump's threats also open up opportunities for negotiations, particularly in sectors such as digital trade and energy, where mutual interests align. One major change since 2020, when Trump left office, is the energy landscape.
During his first term, Trump criticised European countries-especially Germany-for their heavy
reliance on Russian energy imports, particularly due to the Nord Stream 2 pipeline, while simultaneously maintaining military dependence on Washington.
Now, with Trump back in office, Russia's share in the EU energy market has drastically declined, while the US is exporting significantly larger quantities of liquefied natural gas (LNG) to Europe than before the war in Ukraine. In addition to reducing its reliance on Russian energy, Germany has increased its military spending beyond 2% of GDP and has become the second-largest supplier of military aid to Ukraine, after the US.
In this context, the war in Ukraine has reduced the imbalance in EU-US relations, making Trump's arguments somewhat weaker this time around.
The US is expected to remain the largest importer of EU goods, accounting for nearly one-fifth of the bloc's exports. America's biggest trade deficit with the EU is in machinery and vehicles, with a gap exceeding $106 billion in 2023. However, it is important to note that American cars are less competitive than European brands in other parts of the world as well, particularly against German manufacturers.
In the energy sector, Washington had a trade surplus with the EU worth €70 billion, while Europe also has a significant trade deficit in the services sector.
As a result, negotiations between the two sides may be smoother than Trump publicly portrays. European Central Bank President Christine Lagarde recently told CNBC in Davos that the EU must be prepared for potential US tariffs under Trump. However, she also noted that he has not yet imposed the sweeping tariffs he had promised, calling this "a very smart approach", suggesting that Europeans do not expect a full-scale trade war.
In this sense, a redefinition of trade relations is anticipated, but deep economic hostility seems
unlikely.
Dimitrije Milić is a PhD candidate at the Faculty of Political Sciences and the programme director of the organisation Novi Treći Put (New Third Way). His research focuses on international relations, which he also explores through coordinating his organisation's activities in media monitoring, focus groups, public opinion surveys, and political analysis for media in Serbia and abroad.
Još uvek nema komentara - sjajna prilika da pokreneš diskusiju.