Will Europe Be Able to Counteract American Tariffs?
The European Union (EU) has outlined a comprehensive strategy to address trade issues with the United States and China, as detailed in the Draghi report titled "A competitiveness strategy for Europe." Authored by the European Commission, the report aligns with recent industrial policy discussions within the EU context.
In response to the growing tensions in transatlantic relations, the EU is pursuing a diversification of trade to reduce dependence on the U.S. and China. This move is aimed at fostering economic resilience and maintaining a balanced approach in international trade.
Nathalie Dezeure, the Head of Macro & Financial Institutions Research, believes the EU is in a favourable position to negotiate trade issues with both the United States and China. The EU's strategic response includes the revival of its single market competitiveness and the diversification of trade to reduce dependence on major trading partners.
The EU's framework has been strengthened over the past two years with the introduction of instruments such as the Anti-Coercion Instrument (ACI), the Foreign Subsidies Regulation (FSR), and the International Procurement Instrument (IPI). These measures are designed to protect the EU's interests and maintain a level playing field in international trade.
The EU's reliance on the U.S. for 6.7% of its trade in goods and on the U.S. for 18.3% of its trade in goods underscores the significance of the relationship. However, the EU, with a market of 450 million inhabitants, rapidly growing trade, and a network of trade agreements, seems capable of providing a firm response to the U.S., while maintaining a resilient relationship.
The EU's long-term goal is to maintain economic resilience in trade negotiations with the U.S., with a focus on continuity in dialogue and a common response to unilateral measures. If negotiations with the U.S. fail, an emergency aid plan will be necessary to support vulnerable sectors and contribute to the economic resilience of the EU.
The EU's ability to speak with one voice on the global stage strengthens its position in international trade. The EU has various deterrence mechanisms to defend its interests and bring the U.S. to the negotiation table. In the long term, the EU is focusing on economic resilience in trade negotiations with the U.S., with the ultimate aim of maintaining a balanced and mutually beneficial relationship.
