US Tariffs on Aluminum and Steel from the EU, Canada And Mexico

Donald Trump’s trade war with the rest of the world has become a reality. What strategy should Europe adopt?

The transition, or rather, a grace period, is over. American tariffs on imported steel (25 percent) and aluminum (10 percent) are already headed for the European Union, Canada and Mexico. In other words, countries that are, theoretically, America’s closest allies. Ironically, President Donald Trump invoked the issue of national security in imposing the tariffs. If steel and aluminum from the countries which are members of NATO are a threat to America, then the question is: why is the U.S. still in the organization at all?

Moderate Retaliation or Full-On Trade War?

The EU, Canada and Mexico are preparing long lists of goods imported from the U.S. on which they want to impose tariffs as a form of retaliation. In Europe’s case, there are, for example, Harley Davidson motorcycles, orange juice, jeans and Bourbon. The basic question the Europeans are asking is whether to limit retaliatory measures or enter into a full-on trade war. Is it better to count on Trump calming down again and to refrain from irritating him too much, or to hit hard right away because passivity would only encourage the president to cause further damage to Europe?

A Strong Reaction from Europe Is Needed

Unfortunately, the first cooperative strategy makes no sense because Trump is constantly pointing out how bad and protectionist the EU is. He is planning to impose further tariffs anyway. What irritates him most are cars imported from Europe, mostly from Germany, which he would love to remove from the American market. That is also bad news for Poland as a country with a large number of Western auto company assembly plants. Therefore, there is no need to hesitate about retaliating. One can only speak with Trump on his terms. The EU has a much larger economy than America’s, with a far greater number of consumers. Although internally divided and often conflicted, the EU has to speak speak with one voice when it comes to trade, and that voice should be powerful.

Higher Taxes in Europe on American Technology

Tariffs on motorcycles and juice are mainly symbolic as they won’t hurt the U.S. that much. What would impress the the U.S.? It is true that the European Union exports far more goods than it imports, this is the reason for the trade deficit that annoys American producers so much. But when it comes to services, the situation is different. In this regard, it is Europe that has a significant deficit, especially because of companies like Google, Amazon, Facebook and more recently, Netflix. From America’s perspective, they are great exporters, and today, they should be bargaining chips. If Washington wants to hurt European producers of cars and steel, Europe should respond with much higher taxes and regulatory measures on the American technology sector, which earn tons of money on our continent and which have become a monopoly in many areas.

Donald Trump Will Be Gone Someday, but the US and Europe Will Still Be Stuck with Each Other

At the same time, it is important to support everyone in the U.S. who is not at all keen on Trump’s trade crusade. For American consumers, more expensive steel and aluminum mean higher prices on many products. Little wonder that even many Republicans stand with the rest of the world against the trade war. But it is crucial to do what it takes to protect good relations with the rest of the U.S. while fighting with President Trump. This is because someday, Trump will be gone and normalcy between the two Atlantic shores will have to be restored. We are stuck with each other if we want to mean something in the future and refuse to relinquish the field completely to China, India or the other developing Asian powers.