Even before Donald Trump's arrival in the White House, the diagnosis was worrying: Economically, Europe had been losing ground to the US for two decades. The Trump tornado has created a major new shock. The apparent abandonment of Ukraine, the historic break in the transatlantic link, thunderous announcements of a trade war, including perhaps "25%" of tariffs "soon" against the European Union (EU)... Trump has been saturating the airwaves and Europeans have been left stunned.
It's hard not to despair over the situation. And yet, there are at least some good reasons in Europe to debunk the prevailing pessimism. Firstly, populists love nothing more than to darken the situation in order to prosper and agreeing with them would be bestowing upon them too great a gift. Secondly, Europe still has assets.
First and foremost, its size. The EU may be a geopolitical dwarf, but it carries a lot of weight economically. Its gross domestic product is €17 trillion, compared with €25 trillion for the US. "A trade war with Europe means going head-to-head with an economy that is more or less the same size as our own," warned American economist Paul Krugman.
What's more, the EU is less naive than during the first Trump presidency (2017-2021). "We've equipped ourselves with new retaliation instruments," pointed out Elvire Fabry of the Institut Jacques Delors. In particular, Europe created an "anti-coercion instrument" in 2023. This "nuclear weapon" for trade, which has never been used before, enables Europeans to retaliate against a country that exercises "economic coercion." Legally, it allows them to use tools other than customs duties. For example, the instrument can be used to block a country's access to European public procurement markets, or to suspend its intellectual property rights. It is also possible to target individual companies or even individuals. "Elon Musk and his business activities would qualify," said Aslak Berg of the Centre for European Reform think tank. He suggested, for example, that advertising on X – owned by the billionaire – could be banned in the EU or even the network entirely.
You have 42.97% of this article left to read. The rest is for subscribers only.