Europe Won’t Get the Better of Trump with Counter Tariffs—The Currency Is Trust

Donald Trump suspended his tariffs again for 90 days Wednesday evening. How should Europe react? Precisely because the man decides based on his mood — or manipulates the markets enabling his friends to make substantial profit at the cost of the global economy — the EU should think very carefully about what it does.

The scale of this trade war defies the logic of economics. Trump doesn’t care about the rate of return or protecting the national economy; he cares about power. It’s about the U.S. president’s ability to lead the world by its nose. It’s a poker game where Trump stands to win or lose everything. On Wednesday, the market was flooded with U.S. bonds — a sure sign that investor confidence in the U.S. is shrinking. Only that made Washington reconsider.

The EU needs to step in here. The current tariff proposals from Brussels systematically target the economy of those U.S. states that are considered Republican strongholds. A recession there would undermine one of Trump’s core campaign promises: an economic boom. The man in the White House is shooting himself in the right foot with his tariff policies; Europe’s response should kick the left foot out from under him. At the same time, Brussels can profit from the lost confidence by strengthening its domestic market and boosting economic activity.

There are various instruments for doing that. First, the Capital Markets Union, which could now free up desperately needed capital for Europe’s waning economy. The EU Commission estimates that a “real” Capital Markets Union would mobilize an additional $526 billion annually in private assets. Combined with a “Buy European!” campaign and a “Made in Europe” label, these measures could at least somewhat ease the blow to global trade.

The EU has know-how, stability, and freedom, which are currently coming under fire in the U.S. Researchers from American universities are already seeking refuge in Europe. Why shouldn’t we make it possible for companies to follow them? The trust that Trump is currently gambling away can’t be bought. But it can be earned — with honesty, reliability, and deliberation.