"EU's Two-Phase Trade Strategy for Trump Reelection... Carrot and Stick"

The European Union (EU) is reportedly preparing a two-step trade strategy, summarized as 'carrot and stick,' in anticipation of the possibility that former President Donald Trump, who has pledged universal tariffs, might win the upcoming U.S. presidential election this November, according to foreign media reports.

[Image source=AP Yonhap News]

On the 28th (local time), major foreign media reported that if the Republican candidate, former President Trump, succeeds in his re-election bid, the EU plans to meet with the Trump team before the inauguration in January next year to negotiate which American products the EU can purchase more of.

However, if negotiations fail and higher tariffs are imposed on EU products, the European Commission has decided to respond with retaliatory tariffs. To this end, the EU is currently compiling a list of imports on which it can impose tariffs exceeding 50%. It is estimated that if Trump's proposed 10% universal tariff materializes, EU exports could suffer a blow worth approximately 150 billion euros.

A senior EU official said, "We need to show that we are partners, not America's problem," adding, "We will strive for negotiations, but we are prepared to defend ourselves if talks break down. We will not be swayed by fear."

Previously, the U.S. and the EU engaged in a so-called tariff war during the Trump administration (2017?2021). In 2018, Trump imposed tariffs on EU steel and aluminum worth 6.4 billion euros, citing national security. In response, the EU retaliated with tariffs on Harley-Davidson motorcycles, bourbon whiskey, powerboats, and others. These tariffs were suspended under the Joe Biden administration, but following the failure of steel tariff negotiations last year, the suspension was extended for two years until 2025, after the elections on both sides.

Valdis Dombrovskis, EU Commissioner for Trade, emphasized in a foreign media interview, "We believe that the U.S. and the EU are strategic allies," adding, "In the current geopolitical situation, it is important to work together on trade." However, he also stated, "We have protected our interests with tariffs (against the U.S. tariff war) and are ready to defend ourselves again if necessary."

Recently, Jan Hatzius, Chief Economist at Goldman Sachs, predicted that a tariff war could cause greater damage to the EU economy than to the U.S. According to the report, if a tariff war between the two sides materializes, Europe's inflation could rise by 0.1 percentage points, and its gross domestic product (GDP) could be hit by about 1%. In contrast, U.S. inflation is expected to surge by 1.1%, with a 0.5% impact on GDP. The EU mainly imports daily necessities from the U.S., while its key export items are relatively more expensive goods such as automobiles, pharmaceuticals, champagne, and other high-end beverages.