POST US-EU TRADE ACCORD

Learn from John Wayne

1. Lesson #1: Actions Have Consequences (You can't run from your problems—especially those you create for yourself).
2.  Lesson #2: You Can Only Rely On Yourself (The only person you can rely on to advocate for you is the man in the mirror).
3.  Lesson #3: A Little Patience Goes a Long Way (by practicing patience, we can see things the way they truly are).
4.  Lesson #4: Take Responsibility ( If there's something in your life you know you can't run away from, you're better off facing it head-on).
5. Lesson #5: Do the Right Thing for the Right Reason (That’s  the best any of us can do).

The EU needs to rethink its EU trade policy vis-à-vis the United States. The EU should at least consider ways to strengthen the political effectiveness of its trade defense and deterrence policies by more directly taking into account Trump’s cost-benefit calculus. 

The EU should not take measures that seek to target US political actors with little or no influence over the trade policy process. Seeking to influence other senior officials at the State Department, the Commerce Department, the Treasury, or the Office of the United States Trade Representative, for example, has only a limited effect.  

As long as the president dominates the trade policy process, the EU should consider devising trade defense and deterrent policies that affect the president’s cost-benefit calculus more directly. Judging by the recent twists and turns of trade policy, the president appears responsive to the risk of broader financial market instability, as evidenced by his decision to suspend the reciprocal tariffs following a major bout of treasury market volatility. And even though the president was initially willing to massively escalate measures targeting China, the significant equity market selloff that ensued led to an equally rapid reduction in bilateral tariffs to levels seen as less damaging to the economic outlook. 

The EU should consider adopting a strategy that credibly and effectively threatens to retaliate and escalate in response to unfriendly, protectionist measures while accepting the risk of broader instability. Such retaliatory threats should leave something to chance, including the risk of a potentially, difficult-to-control escalation, as the risk of such an escalation would not be in the president’s interest.

It is obvious that such an approach would be risky because it could prove escalatory. That any such policy needs be evaluated very carefully is clear. But Trump’s trade policy has proven responsive in the face of broader economic costs and financial instability. With extensive trade policy authority vested in the president, the risk of a volatile and unpredictable US trade policy will remain high. Putting in place an effective and credible trade defense and deterrence policy would be highly desirable if European interests are to be safeguarded and transatlantic trade relations stabilized.

Long term retaliation plan with gradual accumulation of measures:

1. Apply strategic pressure on the U.S and its businesses through trade defense instruments (e.g. the Anti-Coercion Instrument), new financial levers such as “digital tax” or enforcement actions against U.S. tech players; 
2. Reduce dependencies on the U.S., by advancing a “European preference” in upcoming reforms, while diversifying trade partnerships (e.g. Mercosur, ASEAN countries).
3. Regulation on Foreign Subsidies: In force since July 2023, it provides new powers to the Commission to weigh the positive and negative effects of a foreign subsidy and impose remedies or block the transaction or procurement altogether;
4. Anti-Dumping Regulation: In force since July 2016, enables the Commission to investigate and counter unfair pricing practices when products are sold below their normal value. 
5. Targeted enforcement of tech regulation: Key EU policymakers across the political spectrum and representing different Member States in Brussels have been urging the Commission to enforce the Digital Service Act (DSA) and the Digital Markets Act (DMA) by imposing strong fines for non-compliance —particularly for digital companies seen as aligned with Trump.
6. “Digital tax” penalizing U.S. businesses: Calls for a tax—largely targeting U.S. tech firms.
7. “Buy European Act” to support a European preference reducing exposure to foreign suppliers—particularly those from the U.S.
8. Accelerating the implementation of the trade agreements with the Mercosur countries as well as fully operationalizing agreement with Singapore and Vietnam; 
9. Accelerating discussions for an EU-India Free Trade Agreement, with talks revived in 2022, that Ursula Von der Leyen hopes to have concluded by the end of 2025. The Commission intends to propose a new EU-India Strategic Agenda and hold an EU-India Summit. Contention points still remain, especially regarding EU safeguard measures on certain steel products; 
10. Turning an existing partnership with Indonesia into a free trade agreement, while also resuming talks with Thailand and the Philippines.
11. Deepening the EU–Japan Economic Partnership Agreement and the EU–South Korea Free Trade Agreement, particularly in the area of critical technologies.