Will Europe Find a Way to Counteract American Tariffs?

The European Union (EU) is gearing up for trade negotiations with key global partners, particularly the United States, and is focusing on economic resilience as a long-term strategy, according to Nathalie Dezeure, Head of Macro & Financial Institutions Research.

Dezeure believes that the EU is in a favourable position to negotiate trade with both the United States and China. However, she emphasises the importance of reducing dependence on these two economic powerhouses through diversification of trade. The EU's current significant trade relationship with the United States, accounting for 18.3% of its trade in goods, could be mitigated by an analysis of value-added trade, depending on the sectors. In comparison, the United States accounts for just 6.7% of the EU's trade in goods.

To defend its interests and bring the United States to the negotiation table, the EU has various deterrence mechanisms at its disposal. These include the recently introduced Anti-Coercion Instrument (ACI), the Foreign Subsidies Regulation (FSR), and the International Procurement Instrument (IPI), which have strengthened the EU's position on the global stage.

Dezeure suggests that the EU should establish a common response to unilateral (aggressive) measures and focus on economic resilience in the long term. This includes an emergency aid plan for vulnerable sectors in the event that negotiations with the United States fail. The EU, with a market of 450 million inhabitants, rapidly growing trade, and a network of strengthened trade agreements, seems capable of providing a firm response.

However, the main risk to the EU's resilient relationship with the United States may come from some member states showing a desire for restraint in their response. Maintaining continuity in dialogue, as recommended by Dezeure, is therefore a crucial strategy for the EU in trade negotiations.

The revival of the competitiveness of the European single market through an integrated industrial policy is part of the long-term strategy. The EU's ability to speak with one voice on the global stage strengthens its position in international trade, making it a formidable negotiating partner.

In conclusion, the EU is taking a strategic approach to its trade negotiations with the United States, focusing on economic resilience, diversification, and a unified voice. By strengthening its position with instruments such as the ACI, FSR, and IPI, the EU is well-prepared to navigate the complexities of international trade and protect its interests in the long term.