Will the EU crumble under Trump’s tariffs?

In the escalating trade war between America and China, the European Union risks being stranded in no man’s land. Donald Trump has raised tariffs on Chinese imports to 145 percent, with Beijing imposing their own tariffs of 84 percent. The President remains bullish that America and China can thrash out a deal, saying: “I’m sure that we’ll be able to get along very well… I think that we’ll end up working out something that’s very good for both countries.”

The EU will hope so because the trade war threatens to create dangerous fault lines within the bloc of 27 nations. On Thursday, Ursula von der Leyen postponed the EU’s retaliatory tariffs after Trump’s decision to suspend American tariffs for ninety days. “We want to give negotiations a chance,” announced the European Commission president.

EU spokesman Olof Gill followed von der Leyen’s statement by saying that they “want to negotiate, we want to talk.” He added that the postponement of counter-measures will allow Brussels to “consult with our member states, consult with our industry and negotiate with the US. We’re ready to make deals.”

The EU will not be negotiating from a position of strength. The bloc is ailing. They know it and so does Trump. Following the market turmoil created by Trump’s tariff war, Germany, France, and Italy all slashed their growth forecasts for the year. The governor of the Bank of Spain has also warned that the country faces an economic downturn because of the uncertainty.

The only real surprise of the last week is that expressed by so many politicians and commentators in Europe. Trump has done what he promised he would when he campaigned last year.

One of the few Europeans who hasn’t been caught unawares is Mario Draghi, the former president of the European Central Bank (ECB). Reacting to Trump’s election victory in November, he warned the EU that a storm was brewing. He said that Trump would protect traditional industries where the EU exports “the most to the United States”, and that as a consequence “we should negotiate with the American ally, with a united spirit to protect our European producers”.

Last September, Draghi released a 400-page report about the state of the EU economy. It was a grim read. Draghi said Europe needed to invest an additional €800 billion a year because it was stymied by low productivity and weak growth.

Admitting that he was having “nightmares” about Europe’s future, Draghi said the EU faced an “existential challenge” and the time for procrastination was over. “We have reached the point where, without action, we will have to either compromise our welfare, our environment or our freedom,” he said.

There has been little sign since that the EU is capable of galvanizing itself. France remains a basket case, a country with a barely functioning coalition government and an economy that is at a “standstill”. There is a new coalition government in Germany, but it is not one that inspires confidence. Chancellor-in-waiting Friedrich Merz is considered untrustworthy by 70 percent of his people, which is some going for a leader who has barely got his feet under the table.

Merz outlined his plans this week for an economic reboot, but they were swiftly savaged by German economists. “Large parts of the coalition agreement read vaguely, and the lines of conflict between SPD and CDU/CSU are very clear, for example on income tax,” said Michael Hüther, director of the Institute for Economic Research.

The leaders of Spain and Italy have stronger approval ratings, as well as different allegiances in the trade war between America and China. Spain’s Socialist PM, Pedro Sanchez, visited Beijing this week and expressed his desire for closer trade ties with China. “Only multilateralism and solidarity between nations can address these types of global challenges,” said Sanchez. “Spain defends a world with open doors, a world in which trade unites our people.” Standing alongside Sanchez on Friday, Xi Jinping said that China and the EU must unite to oppose America’s “unilateral bullying practices.” US Treasury Secretary Scott Bessent warned that cosying up to China would be like “cutting your own throat,” and a “losing bet for the Europeans.”

Italy’s PM Giorgia Meloni, who withdrew from China’s Belt and Road initiative in 2023, will visit Washington next week to discuss trade with Trump. Her trip has provoked consternation in Paris. The French government raises no objection when Sanchez rubs shoulders with Xi Jinping in Beijing, but evidently the thought of Meloni talking business with Trump is too much to bear.

France’s industry minister Marc Ferracci declared that ”we need to be united because Europe is strong if it’s united.” France’s Europe Minister Benjamin Haddad chipped in, saying: “If you go to the United States scattered and divided, do you think you’re stronger than if you go all 27, with 450 million people?”

That drew a swift riposte from Haddad’s Italian counterpart. “How come when President Macron goes to Washington everything is OK, but when it is Meloni who goes, things are not OK?” said Tommaso Foti.

Last year, Italy exported €65 billion in goods to the US, a figure surpassed among EU nations only by Germany (€161 billion) and Ireland (€72 billion). No other European country exported more than €50 billion.

The next three months will be a serious challenge for Europe. Brussels boasts of its unity, but as its response to Covid and Ukraine revealed, when the bloc is put under stress, the cracks appear. Trump loathes the EU and he would like nothing more than to break it beyond repair.