Exclusive: France, Germany divided over how to retaliate to US tariffs

The Emerging Divide in the EU’s Response to US Trade Policies

The European Union, often seen as a united front, is facing a growing internal rift in its approach to the trade tariffs imposed by the Trump administration. While the EU has historically presented a cohesive stance in international trade negotiations, the recent threats of tariffs on steel and aluminium imports have exposed underlying divisions among its member states. As the US continues to assert its trade policies, the EU is grappling with whether to maintain its united front or risk fragmentation in its response. At the heart of this debate is the question of whether Europe can continue to negotiate as a single, powerful bloc or if the divergent views of its members will lead to a splintering of its trade strategy.

The Trump Tariffs and the EU’s Initial Reaction

President Donald Trump’s announcement of new trade sanctions sent shockwaves through the EU, prompting an immediate and mixed reaction from its member states. The tariffs, which include a 25% tax on steel and 10% on aluminium imports, were justified by the US on the grounds of "national security." The EU, recognizing the potential impact on its industries, quickly convened an emergency meeting of its trade ministers to discuss a coordinated response. While some countries, like France, advocated for swift and decisive retaliatory measures, others, such as Germany, Italy, and Hungary, favoured a more cautious approach, preferring dialogue over confrontation. This divergence in opinion highlights the challenges the EU faces in maintaining a unified stance in the face of external trade pressures.

The Rift Between Hawks and Doves

The divide within the EU is stark, with France leading the charge for a rapid and robust response to the US tariffs. French officials argue that an immediate reaction is necessary to avoid appearing weak and to prevent the US from imposing further trade restrictions. On the other hand, Germany, Italy, and Hungary are taking a more measured approach, advocating for continued dialogue with the US before resorting to retaliatory measures. Hungarian Prime Minister Viktor Orban, a known ally of Trump, has been particularly cautious, preferring to wait until the tariffs are officially implemented before taking any action. This split between "hawks" and "doves" within the EU underscores the complex balancing act the bloc must perform to protect its economic interests while maintaining its transatlantic relationship.

The Historical Context and Future Implications

The current tensions are not the first time the EU has clashed with the US over trade policies. In 2018, during Trump’s first term, the EU responded to similar tariffs on steel and aluminium by imposing its own duties on €2.8 billion worth of US products. This retaliatory move was followed by a temporary truce brokered under the Biden administration, which is set to expire at the end of March. The EU has since strengthened its toolkit for responding to trade disputes, including anti-coercion measures that could bar US companies from participating in public procurement tenders or trading in services and intellectual property rights. Despite these preparations, the bloc remains wary of escalating tensions, knowing that a full-blown trade war could have far-reaching consequences for both economies.

The EU’s Quest for Diversification and Cooperation

As the EU navigates its response to US trade policies, it is also actively seeking to diversify its trading partnerships and reduce its reliance on any single market. Recent free trade agreements with countries like Argentina, Brazil, Paraguay, Uruguay, Switzerland, and Mexico, as well as ongoing negotiations with Malaysia and India, highlight the EU’s strategic effort to expand its global trade network. This approach not only aims to strengthen the bloc’s economic resilience but also sends a clear message about its commitment to multilateral trade and cooperation. By broadening its trade horizons, the EU hopes to mitigate the risks associated with its increasingly fraught relationship with the US.

The Path Forward: Unity and Strategy in the Face of Uncertainty

As the EU looks to the future, its ability to maintain unity in the face of external trade pressures will be crucial. The bloc must navigate the complex interplay of economic, political, and strategic considerations to protect its industries while avoiding a damaging trade war. The divide between member states underscores the need for a carefully balanced approach, one that takes into account both the short-term need for retaliation and the long-term importance of maintaining dialogue with the US. By leveraging its collective strength and diversifying its trade partnerships, the EU can position itself as a resilient and influential player in the global economy. The challenge ahead is to ensure that the bloc’s internal divisions do not undermine its ability to act decisively and cohesively in the face of uncertainty.