In the end, the trade war with the US did not begin on Monday, January 20, Donald Trump's first day in office. It is, however, only a matter of time. After having promised that he would raise tariffs throughout his election campaign, the new US president merely reiterated his threats in his inaugural address: "Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens."
He elaborated, stating that imports from Mexico and Canada would be taxed at 25% from "February 1." As for European countries, he said: "They're very tough. They don't take our cars. They don't take our farm products, they don't take almost anything," Trump said. "We'll straighten that with either tariffs, or they have to buy our oil and gas," he continued. During the campaign, he had spoken of a 10% tariff on European imports. On Monday, he opened a new front on taxation, signing a presidential memorandum withdrawing the US from an international agreement on taxing multinational companies (which had aimed to impose a 15% minimum tax rate, but which Congress had never ratified).
These moves seemed to confirm something that his teams had been suggesting for months: The tariffs were a weapon for bargaining, to be used on allies and adversaries alike. "But he's not bluffing," said Brian Coulton, chief economist at the credit ratings agency Fitch, on January 14. Sooner or later, Trump will impose new tariffs, as he did during his first term in office. Two regions of the world with large trade surpluses with the US were in his sights: China, of course, but also Europe.
Against this backdrop, Europe is faced with a dilemma: Should it respond eye-for-an-eye to tariffs, at the risk of escalation? Or should it temper, via a targeted response, as it had already done during Trump's first term?
"Europe cannot let itself be pushed around, and will have to take retaliatory measures," said Agnès Benassy-Quéré, second vice-governor of the French central bank, the Banque de France. According to the economist, European countries' "credibility" was at stake, even if it meant accepting "the risk of escalation."
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