Europe Should Not Retaliate Against US Protectionism
At some point, US President Donald Trump's pursuit of protectionism policies is likely to hit Europe hard. But instead of responding in kind with tariffs on US imports, the EU should pursue a de-escalation strategy – one that also frees its own citizens from the yoke of European agricultural protectionism.
MUNICH – US President Donald Trump is making good on his promises to put “American first” through trade protectionism. How should Europe respond?
Trump has temporarily exempted Europe from his newly imposed import duties on steel and aluminum. But his Sword of Damocles – high import tariffs – still hangs over Europe. Indeed, he has already pledged to impose tariffs on European cars – targeting, in particular, BMW and Mercedes – to help US car producers, even though this will also hurt American consumers. As always, consumers are politically less powerful than producers, as their per capita losses are smaller than the producers’ per capita gains, and they face more barriers to collective action.
The European Commission has been considering retaliatory tariffs on a variety of imports from the United States – ranging from Harley Davidson motorcycles to food products like orange juice and peanut butter – in the hope that affected American producers put pressure on the Trump administration. This obviously worked for the moment, but it is ultimately the wrong strategy.