‘Meet force with force’

The EU’s response

The measures taken by the EU so far in response to the Trump administration’s tariffs have remained extremely cautious. Washington is currently imposing tariffs of ten per cent on all imports from the EU. They are to remain in place permanently. In addition, there are tariffs of 25 per cent on steel and aluminium, on the one hand, and on cars and automotive parts, on the other. Further tariffs to be imposed by President Trump on 2 April – known as reciprocal tariffs – have been suspended for ninety days in the case of the EU. Today, Wednesday, the Trump administration will again increase its tariffs on steel and aluminium – this time to 50 per cent. For its part, the EU finalised a list of US goods in April on which tariffs are threatened as a counter to US steel and aluminium tariffs. The list includes goods with a total import value of 21 billion euros, including soybeans and Harley Davidson motorcycles. It has also drafted a further target list of US goods worth 95 billion euros, which is to be finalised next week. This package includes cars and automotive parts, aircraft, medical devices, and chemicals. EU tariffs could be imposed on these goods from the end of June if no negotiated solution to the tariff dispute is reached, say EU officials.[1]

‘Taking risks’

The EU’s softly-softly approach is to issue warnings but take little action. The restraint is causing increasing discontent among economic experts and policy advisors. In a recent article, Markus Jaeger, a research fellow at the German Council on Foreign Relations (DGAP), urges the EU to take a more aggressive stance. A policy of targeting counter-tariffs at red states across the United States where Trump has a large voter base will not, he argues, be effective. So far, Trump has been able to brush off these pin-pricks. It would be better for Brussels to “influence President Trump’s cost-benefit calculus rather than targeting other actors. Experience to date shows, Jaeger observes that Trump generally avoids “the risk of broader financial market instability”. When such a risk looms, he withdraws his tariffs. A sharp slump in the stock markets, for example, prompted him to freeze the tariff war against China.[2] The EU must, Jaeger concludes, move to a strategy that carries a “credible and effective retaliatory threat”. So, if necessary, Europe should not shy away from an “escalation” of the conflict in the way it responds to “unfriendly protectionist measures”. Indeed, he believes it is best even to take the risk of widespread instability. According to Jaeger, a former employee of Deutsche Bank Research, this is the only feasible tactic for standing up to Trump.

‘Entirely failed’

Shahin Vallée, another research fellow at DGAP – who was previously an economic advisor to European Council President Herman Van Rompuy, then to Emmanuel Macron at the French Economics Ministry, and most recently to George Soros – is even more critical. Vallée explains that the EU has “entirely failed to understand and deal with US President Donald Trump since his re-election.”[3] Firstly, it refused to accept that it was necessary to “meet force with force, openly and visibly.” Secondly, it missed the “extraordinary opportunity” that arose when Trump started “confronting the whole world head-on all at once”. Immediate coordinated action “with countries such as China or Canada” would have isolated the United States and forced it to back down. This has now been achieved successfully by China because it “stood firm and used its leverage in critical areas,” resulting in “complete US capitulation”. Vallée writes that China has shown that it does not need to rely on cooperation with the EU in any future economic war with the US. The EU, by contrast, is now stuck in another round of tariff threats – and is likely to face even greater pressure from Washington in the future.

Ready for escalation

In view of the acute situation, Vallée argues forcefully for the EU to do a “complete U-turn” and abandon its toothless economic strategy towards the Trump administration.[4] As a first step, Brussels must “implement immediately its steel and aluminium tariff response”. It should simultaneously announce a set of scheduled retaliations against Trump’s automotive tariffs as well as against any of his suspended “reciprocal” tariffs. This must, at the very least, mean targeting imports from the US worth over 150 billion euros. Secondly, the EU must signal that it will restrict exports of critical goods that the US would find difficult to replace. Vallée cites the example of state-of-the-art lithography technology that is essential for semiconductor manufacture. He is presumably referring to equipment used in American advanced chip production that is supplied by the Dutch company ASML and is currently considered to be largely without alternatives, at least in the West.[5] Thirdly, the DGAP policy expert advocates measures to be taken against imported US services. These include digital service taxes to be levied on the profits of large US internet companies and steps to curb the activities of US financial service providers that profit from European assets. Vallée’s advice is for the EU to be ready for a sharp escalation of the current conflict.

Europe as a world power

The calls for a more offensive response by the EU to the Trump administration’s punitive tariffs are accompanied by demands that the EU should move towards an independent role as a world power. Last week, for example, European Commission President Ursula von der Leyen explicitly demanded that the EU must “shape” a “new international order” that “will emerge in this decade”. She exclaimed that, “Our mission is European independence.”[6] Speaking in Berlin, shortly before, the European Central Bank (ECB) President Christine Lagarde had called for the euro to take on “a greater international role”. Her ambition is for the euro to offer a partial challenge the dollar as a global reserve currency.[7] Berlin, for its part, is seeking to increase military spending to a massive five per cent of German GDP. Indeed, the goal of upgrading the Bundeswehr has explicitly been stated as Germany becoming the strongest conventional armed forces in Europe.[8] The thinking is that such a huge level of spending could eventually enable the EU to become a leading military power on the world stage. In this scenario, Europe equipped with a strong global currency and an independent economic policy could be a global leader – under German leadership.

[1] Jakob Hanke Vela: 100-Milliarden-Vergeltungsliste – EU erhöht Druck auf Trump. handelsblatt.com 08.05.2025.

[2] Markus Jaeger: The EU Should Change Its Approach to Countering Trump’s Tariffs. ip-quarterly.com 28.05.2025.

[3], [4] Shahin Vallée: How the EU Botched its Trade Policy Response. ip-quarterly.com 31.05.2025.

[5] See also: Entkoppeln und aufrüsten.

[6] Speech by President von der Leyen on being awarded the International Charlemagne Prize of Aachen. ec.europa.eu 29.05.2025.

[7] Earning influence: lessons from the history of international currencies. Speech by Christine Lagarde, President of the ECB, at an event on Europe’s role in a fragmented world organised by Jacques Delors Centre at Hertie School in Berlin, Germany. ecb.europa.eu 26.05.2025. See also: Euro versus dollar.

[8] See: Military Republic of Germany.