The European Union was expected to line up next after the Trump administration imposed tariffs on Mexico, Canada and China. In fact, Washington imposed a 25% tariff last week on steel and aluminum imports from the EU, and other goods, including cars and agricultural products, by early April.
Europeans tried to flatter President Donald Trump and hinted that they could buy more US gas and weapons in exchange for a reduced tariff threatened. But at the same time, Europeans are brainstorming what a decup from the US in trade and defense means for them. They are also wondering if there are still realistic options other than soothing Trump.
In response to Trump’s tariffs during his first stint as US president, the EU retaliated with higher duties on Harley-Davidson motorcycles and Kentucky bourbons. This time, they reportedly created a list of retaliatory tariffs. But retaliation is not a good path for EU countries, even if it turns out to be necessary, as it inevitably hurts their own constituents who have become dependent on imports from the US and risks being hostile to Trump.
So the Bullock is pursuing a more conflicting and benign policy that reflects dormant trade agreements to offset the costs of Trump’s tariffs.
In December 2024, a month after President Trump won the US presidential election, the European Commission’s Ursula von der Leyen signed a controversial trade agreement with four founding members of the Mercosur Bloc, Aravensina, Brazil, Paraguay and Uruguay. She also resumed consultations with Malaysia and visited India with her entire team.
Together, these countries represent nearly 2 billion potential customers and a vast alternative market in a place where the middle class is on the rise. However, promoting these trade transactions could come at the expense of EU green regulations and the growth of clean industries.
The EU has rejected farmers’ protests against the Mercosur agreement. Protesters had dumped fertilizer and threw away tires for almost a year in Brussels and other European capitals. Farmers from various European countries led by French contemporaries protested for a variety of reasons, but they become expensive, primarily fearing that quality but Latin American beef would flood European markets. The EU said it believes the agreement will benefit European companies with access to vast markets, including protecting the amount of beef that can be imported.
“As the large competition is growing, I think our appetites are growing around the world to become more closely involved with us. Over the past two months, we have signed new partnerships with Switzerland, Mercosur and Mexico, meaning that 400 million Latinos will soon be engaged in privileged partnerships with Europe,” von der Reyen said at the World Economic Forum in late January.
On a visit to India in February, Von del Reyen has announced his goal of working with Indian Prime Minister Narendra Modi to finalize EU India’s free trade agreement by the end of the year. A senior Indian diplomat who spoke in anonymity stated that the speech resumed several years ago after a long stop of negotiations that began in 2007, but said that EU India’s bond had “a great momentum.”
According to Indian government sources, the EU and India were both ready to make major concessions to move forward. They said India will consider cutting high tariffs in light of the EU’s demands. This would consider cutting 60-100% on European cars and other luxury goods, but expect it in return for no room to open agricultural imports as the sector is India’s largest employer, providing jobs to almost half the country’s working-age population.
Among the signs of the EU’s openness to Indian concerns, German deputy prime minister and economy minister Robert Hebeck admitted that the two agricultural sectors cannot be compared. “If you open up the market completely… the turmoil in the Indian market will be enormous,” he said.
India also hopes that the EU can adopt mechanisms that reduce or mitigate the impact of carbon taxes that are said to be imposed by third countries on steel and other carbon-intensive products in order to promote the growth of clean industries. The EU has devised a rebalancing mechanism using Mercosur blocks. This will allow four Latin American countries to challenge EU environmental measures, including carbon border control (CBAM) and deforestation laws. India expects similar concessions.
EU consultations with Malaysia have also resumed, but only stopped after the EU deforestation law proved the origins of exports and was asked by suppliers to track and track the entire supply chain.
Some experts believe there are few regulations that are suitable for your business. Jacob Kirkegaard, a senior Bruegel fellow and a senior non-resident fellow at the Peterson Institute for International Economics, said von der Leyen had a “un-ambitious extraterritorial agenda” in his second term.
“Essentially what the EU is doing is impose non-territorial regulations in third countries,” Kierkegaard said. “That agenda will make free trade agreements much easier because the new committee has fewer feet.”
Kirkegaard said that even if these trade transactions cannot compensate for the decline in trade with the US, free trade is still mutually beneficial and will retain the appeal of the current global trading system to developed and developing countries.
“What the EU is trying to do is show that pursuing the free trade agenda actually offers economically,” Kierkegaard said. “Maybe it’s not President Trump, not existing leadership, not President Trump, and not President Trump, and the other new leaders that actually see this as I agree with is about maintaining the existing system. In my opinion, it’s no better way for the EU to continue pursuing important regional deals between Mercosur and perhaps India.”
Some scholars say the EU should take it a step further and build a federation of like-minded nations, leaving the United States to the World Trade Organization (WTO). “The EU should also prepare a lawsuit under the WTO that links as many affected economies as possible,” Ignacio Garcia Bercero wrote in an article in Bruegel.
Andre Sapil, a Belgian economist and senior fellow Bruegel, believes it is too early to predict economic decoupling between Europe and the US. “I think it’s too strong to say that EU-US decoupling is ongoing,” he said, adding that Trump may decide to target individual member states with specific tariffs rather than the EU as a whole. “He has a strong attachment to bilateral trade balances. He may have targeted bilateral tariffs on (US) and all those who have a trade surplus.”
But Brussels’ message is clear. It won’t be bullied and cower under pressure. “Bullying and trading may be President Trump’s daily routine, but in Europe they have replaced jungle law with the rule of law,” said Beld Lange, chairman of the European Parliament’s Trade Commission. “Trump’s decision to impose heavy import duties on steel and aluminum is a clear violation of international law, and we require (US) to play it again by rules.”
The hope for Europe is that it can make deals with Trump in time to stop the otherwise inevitable decoupling.
Anchal Vohra is a Brussels-based columnist of foreign policy writing about Europe, the Middle East and South Asia.