Bet on that …? Speculation is currently rife as to what moves Donald Trump will announce as he begins his second term in office as US President. From the EU’s perspective, trade policy is at the centre of attention. One key question is whether – and if so, at what level – Trump will impose tariffs on imports from Europe: 5%, 10%, or 20%. Another is how steep the tariffs on imports from China might be. Will they really reach 60%?

It is sometimes argued that European companies might benefit from US XXL tariffs on Chinese goods. After all, they could offer products in the US at more competitive prices than their Far East rivals. However, this view is shortsighted. It ignores the risk that China could flood the European market with goods it can no longer sell cheaply in the United States. Experts see this as a potentially even greater risk for Europe and its companies than US punitive tariffs on EU imports.

A heated debate is underway about how the EU should respond to any US tariffs targeting European goods. Mercedes CEO Ola Källenius used the Brussels Motor Show as a platform for a passionate appeal not to retaliate against US measures: „Trade wars no winners“, he said – and he’s right.

But this raises the question of what alternatives the EU has. Europeans need to assess the strategic landscape, which doesn’t look particularly favourable. First, the EU is in a weaker position. Studies suggest that in a scenario of tariffs and counter-tariffs, the EU would face more significant economic losses in the medium term than the US. Second, the EU is more cumbersome in deploying trade policy tools. What the US President can enact with an executive order requires a complex process of consensus-building in the EU, particularly in trade matters. For these reasons, an aggressive approach seems unwise. Instead, Brussels should make offers to the US President that allow him to claim a win rather than a loss – a language Trump, seeing himself as a dealmaker, is likely to understand.

What could such offers look like? The EU-US Trade and Technology Council (TTC) has a drawer full of proposals for removing compliance hurdles, and making it easier for US firms to enter the European market. As part of its efforts to reduce bureaucracy, the EU Commission could relax requirements for companies from third countries. Additionally, in its efforts to diversify supply chains, the EU could benefit the US – for example, by purchasing liquefied natural gas or defence equipment – and thereby create incentives to avoid harsh trade measures against Europe.

It will also be crucial to emphasise the US administration’s inherent interest in maintaining vital trade with the EU. After all, European companies strengthen US production through direct investments, which could also be at risk in the event of tariffs. Finally, US consumers are an important factor to consider. It’s quite possible that Trump might opt for a milder tariff approach against the EU, in order to avoid backlash from average Americans. Joe Sixpack appreciates products made in Europe and won’t be amused by price hikes.

All in all, the EU would be ill-advised to convince itself that asserting its political self-confidence requires engaging in a trade policy showdown with Trump. Such an approach would not demonstrate sovereignty. But it’s a different matter if Trump uses tariff threats to coerce Europe on issues beyond trade policy. In that case, resilience is needed. As constructive as the EU should be in trade policy dialogue, it must firmly reject any US attempts to turn a blind eye to issues like disinformation and hate speech on social platforms.