By Qaiser Nawab, Chairman BRISD
In a world increasingly defined by economic nationalism, the need for steadfast, principled engagement has never been more urgent. The recent US-EU trade dispute, reignited by President Donald Trump’s threat to impose a staggering 50% tariff on EU goods, is a litmus test of the transatlantic relationship and a warning to those who believe in rules-based international trade.
On May 23, Trump launched a sudden tirade against the European Union, accusing it of exploiting the United States in trade and threatening to hike tariffs from 20% to 50% starting June 1. Just two days later, following a call from European Commission President Ursula von der Leyen, Trump extended the deadline to July 9, buying time for “serious” negotiations. While some in Brussels may welcome the breathing room, it would be naïve to confuse delay with diplomacy.
Europe should not yield.
The Game Trump is Playing
Trump’s tactics are not new. His “America First” doctrine is deeply protectionist, aimed at forcing trading partners into asymmetric concessions through maximum pressure and minimum predictability. It’s a style that creates volatility in the global market and leaves even America’s closest allies unsure of their standing.
According to recent trade data, the EU exported over €532 billion ($603 billion) in goods to the US in 2024, ranging from automotive products and aircraft to pharmaceuticals and machinery. A full 50% tariff on these sectors would cripple industries that employ millions of Europeans. Germany alone exported over 470,000 cars to the US last year. The EU’s auto sector—already grappling with the green transition and supply chain disruptions—would suffer massive losses.
But the pain wouldn’t end there. The retaliatory tariffs the EU is prepared to launch—targeting up to €21 billion in US goods, including bourbon, corn, motorcycles, and aircraft—would also damage American jobs and businesses, especially in swing states critical to US elections. A second list, reportedly worth €95 billion, could push relations to an economic breaking point.
This is not just a trade dispute; it is a fight over who gets to set the rules of international commerce. If the EU gives ground now, it risks surrendering its role as a global trade leader and inviting further aggression—not just from the US, but from other global players eager to test Europe’s resolve.
Much of Trump’s rhetoric hinges on the EU’s trade surplus with the US, which totaled around $233 billion in goods in 2024. But this statistic is misleading. When services are factored in—particularly finance, insurance, and tech—the US runs a $72 billion surplus in services with the EU. Furthermore, much of the surplus stems from consumer preferences and global supply chains, not protectionist policies.
Even more telling is the Trump administration’s insistence that Europe drop its proposed digital services tax—a tax aimed at ensuring tech giants like Google, Apple, and Facebook pay fair taxes in the markets where they generate revenue. Here, the US is effectively defending the tax evasion strategies of its corporations under the guise of free trade.
Time for a Strategic Pivot
Europe must now shift from reactive diplomacy to strategic defense. It should:
1. Maintain a Firm Unified Front: The 27 member states of the EU must speak with one voice. Disunity invites exploitation. France and Germany, as economic engines of the bloc, must rally support for a tough but principled negotiating posture.
2. Push for WTO Engagement: Trump’s unilateral actions, including the threat of 50% tariffs, blatantly violate World Trade Organization rules. Europe should escalate the matter to the WTO and reaffirm its support for multilateral dispute resolution mechanisms.
3. Deepen Trade Alliances Beyond the US: In response to America’s isolationism, the EU has already signed free trade agreements with Japan, Canada, and Mercosur. Now is the time to accelerate talks with India, ASEAN, and the African Continental Free Trade Area (AfCFTA). Diversification is Europe’s best defense against American unpredictability.
4. Boost Internal Investment and Innovation: The EU should use this moment to double down on its green and digital transitions. By investing in electric vehicles, renewable energy, and AI, Europe can reduce dependence on foreign markets and bolster strategic autonomy.
5. Hold Fast on Tax Justice: The digital tax is not negotiable. It is a matter of economic fairness. The EU must resist pressure to abandon reforms that would ensure Big Tech pays its fair share.
At its core, this transatlantic standoff is about more than trade. It is about trust. The European Union has spent decades building a model of diplomacy based on cooperation, the rule of law, and long-term thinking. If Europe caves under pressure, it will not only lose this round of negotiations—it may lose the trust of the Global South, of allies in Asia and Africa who are watching closely to see whether the EU has the resolve to stand up to hegemony.
Europe must remember that global leadership is not merely about economic clout—it is about moral clarity. In resisting unilateralism, defending multilateralism, in standing firm against bullying, the EU affirms that global rules matter. That is a message the world desperately needs to hear.
About Author:
Qaiser Nawab is the Chairman of the Belt and Road Initiative for Sustainable Development (BRISD), an advocate for global economic justice, multilateralism, and sustainable development.
