President Trump’s ‘Liberation Day’ tariff announcements must be understood not simply as a trade war but as an attempt to reshape the global economic system and to coerce partners through a logic of coercive bargaining. On par with all other countries, Europe is a target and a prey to the US.
In this paper, we suggest that there are two fundamental aims the EU must pursue: taking leadership in salvaging the open economic order and increase its capacity to withstand coercive bargaining in defence of own interests.
We also consider what the US negotiation strategy entails. While Trump struck a considered ‘madman’ pose to frighten trade partners into making unfavourable deals, he also postponed the tariffs in response to the spectre of a market crash and credit crunch. In the face of fundamental uncertainty, the EU’s tightrope act consists of preparing to negotiate through the threat of retaliation but also preparing for negotiations to fail. We argue for holding off and buying time, letting the Americans reap what they sow, while preparing a vigorous “one date, one strike”- retaliation together with a term sheet for a reciprocal economic deal, making clear European red lines in any rapprochement.
We map out various tools and instruments the EU can avail of to push back against US trade aggression. The Union is not without means to fight back against Trump’s coercive approach. The bloc’s Trade Enforcement Regulation allows for a wide set of responses to the trade measures we are seeing from the US. Even more far reaching is the Anti-Coercion Instrument. Additionally, the EU can strike US services trade by tightening digital rules and addressing intellectual property and tax shifting. While increasing trade barriers with partners is a sticking point, the EU must also consider safeguard measures to protect European domestic industries from Chinese overcapacities and trade diversion.
Although unlikely at the moment, we also suggest further opportunities, such as pursuing economic security deals with the US. Along with like-minded partners, the EU could also take action to counter Trump, including reinvigorating ideas around a ‘WTO 2.0’.
The gravity of the moment should not be lost on us. Europe faces the prospect of a fundamental shift in global economic flows and systems, along with the risk of an international economic crisis. Facing this onslaught will take effort, unity and collective action.
A prior version of this paper was first published as a blog post on 6 April 2025.
Read the full paper here.