Does Europe have an effective response to Trump’s import tariffs?

If Donald Trump makes good on his threat to impose import tariffs on European products, the EU must provide a clear response, according to Manfred Weber. The leader of the European People’s Party (EPP), the largest faction in the European Parliament, recently suggested that Brussels could retaliate with measures against American digital companies. But is that really an effective response? We asked Charles Kalshoven, expert strategist at APG.

Is it wise for Brussels to implement countermeasures, or was Christine Lagarde, President of the European Central Bank, right when she urged the EU to negotiate with Trump first?
“In the end, free trade is always preferable to import tariffs. Free trade is simply the most efficient option. Countries specialize in producing goods where they excel, which ensures consumers don’t overpay for products. From that perspective, doing nothing would be the best option for Europe. But I should add that this view is based on the ideal of free trade. In reality, you want to take some form of counteraction to prevent someone else—in this case, Trump—from continually dictating the terms. Showing that you can stand up for yourself might have a moderating effect on the other party. Of course, it’s good to talk, but I’m not sure if it’s wise to wave the checkbook right away—buying American goods, as Lagarde suggests. That said, it’s not really her call to make anyway.”

What are examples of countermeasures the EU could take?
“One option is imposing a tax on digital services provided by American tech companies active in Europe, as Weber suggests. Examples include Amazon, Apple, Google’s parent company Alphabet, and Microsoft. These companies are often based in Ireland and currently pay relatively low taxes there.

Another option for Brussels is to impose import tariffs on products primarily produced in U.S. swing states, such as soybeans, to exert maximum political pressure on Washington. Additionally, Europe could impose higher tariffs on U.S. imports that heavily rely on European expertise, such as specialized goods in the chemical, pharmaceutical, and even metal industries. The U.S. imports many such items from Europe and would struggle to replace them, especially if it seeks to reduce imports from other trading partners like China, Mexico, and Canada.

Then there are products like Champagne, Rioja wine, Parmesan cheese, or Gouda cheese, which the U.S. can never truly replicate—Champagne must come from the Champagne region, after all. The biggest trump card, though, might be ASML. Major American companies like Intel and NVIDIA cannot function without the technologically advanced chip-making machines that only ASML produces. But that would take the conflict into the realm of serious economic warfare, and that’s risky business. Hopefully, it won’t come to that.”

So Europe doesn’t have to limit itself to one specific countermeasure?
“It’s possible the European Commission already has a smart plan ready, but they’re unlikely to reveal it in advance. This political tug-of-war is very much a game of action and reaction. Trump’s strength lies in his unpredictability, which keeps others off balance. A touch of unpredictability from Europe wouldn’t hurt either, so don’t reveal your strategy beforehand. One disadvantage, of course, is that the EU is built on laws and rules, which can sometimes limit its flexibility. While it’s strategically wise to prepare countermeasures, it’s also crucial to ensure that a trade war doesn’t spiral out of control. We don’t want to return to the Great Depression of the 1930s, when many countries closed their borders, stifling global trade and deepening the economic crisis.”

Are we inevitably heading for a trade war, or is there an alternative scenario?
“Ultimately, Trump is always interested in making deals—whether with individual countries, a trade bloc like the EU, or even specific companies. That approach doesn’t align well with the rule-based multilateral world order, but a deal is certainly preferable to a trade war. Scott Bessent, Trump’s prospective Treasury Secretary, has already indicated that such a deal wouldn’t have to be limited to trade—it could also cover issues like the dollar’s exchange rate or defense spending. It’s quite possible that Trump is initially aiming for chaos, showing his teeth, only to strike a deal and declare a symbolic victory.

But in Europe, we shouldn’t focus too much on Trump. Sometimes it feels like we’re playing against ourselves here, and that’s something we should change. Regardless of potential trade restrictions against the U.S., we need to strengthen the European economy. One way to do that is by acting on the plan outlined by Mario Draghi, former president of the European Central Bank. In September, he argued in a report that the EU needs to bolster its innovation and competitiveness. If we get our own house in order, we’ll be better positioned to deal with Trump’s whims.”