President Donald Trump promised that a wave of emergency tariffs on nearly every nation would restore “fair” trade and jump-start the economy. Eight months later, half of U.S. imports are avoiding those tariffs. “To all of the foreign presidents, prime ministers, kings, queens, ambassadors, and everyone else who will soon be calling to ask for exemptions from these tariffs,” Trump said in April when he rolled out global tariffs based on the United States’ trade deficits with other countries, “I say, terminate your own tariffs, drop your barriers, don’t manipulate your currencies.” But in the time since the president gave that Rose Garden speech announcing the highest tariffs in a century, enormous holes have appeared. Carveouts for specific products, trade deals with major allies and conflicting import duties have let more than half of all imports escape his sweeping emergency tariffs. Some $1.6 trillion in annual imports are subject to the tariffs, while at least $1.7 trillion are excluded, either because they are duty-free or subject to another tariff, according to a POLITICO analysis based on last year’s import data. The exemptions on thousands of goods could undercut Trump’s effort to protect American manufacturing, shrink the trade deficit and raise new revenue to fund his domestic agenda. In September, the White House exempted hundreds of goods, including critical minerals and industrial materials, totaling nearly $280 billion worth of annual imports. Then in November, the administration exempted $252 billion worth of mostly agricultural imports like beef, coffee and bananas, some of which are not widely produced in the U.S. — just after cost-of-living issues became a major talking point out of Democratic electoral victories — on top of the hundreds of other carveouts. “The administration, for most of this year, spent a lot of time saying tariffs are a way to offload taxes onto foreigners,” said Ed Gresser, a former assistant U.S. trade representative under Democratic and Republican administrations, including Trump’s first term, who now works at the Progressive Policy Institute, a D.C.-based think tank. “I think that becomes very hard to continue arguing when you then say, ‘But we are going to get rid of tariffs on coffee and beef, and that will bring prices down.’ … It’s a big retreat in principle.” The Trump administration has argued that higher tariffs would rebalance the United States’ trade deficits with many of its major trading partners, which Trump blames for the “hollowing out” of U.S. manufacturing in what he evoked as a “national emergency.” Before the Supreme Court, the administration is defending the president’s use of the 1977 International Emergency Economic Powers Act to enact the tariffs, and Trump has said that a potential court-ordered end to the emergency tariffs would be “country-threatening.” In an interview with POLITICO on Monday, Trump said he was open to adding even more exemptions to tariffs. He downplayed the existing carveouts as “very small” and “not a big deal,” and said he plans to pair them with tariff increases elsewhere. Responding to POLITICO’s analysis, White House spokesperson Kush Desai said, “The Trump administration is implementing a nuanced and nimble tariff agenda to address our historic trade deficit and safeguard our national security. This agenda has already resulted in trillions in investments to make and hire in America along with over a dozen trade deals with some of America’s most important trade partners.” To date, the majority of exemptions to the “reciprocal” tariffs — the minimum 10 percent levies on most countries — have been for reasons other than new trade deals, according to POLITICO’s analysis. The White House also pushed back against the notion that November’s cuts were made in an effort to reduce food prices, saying that the exemptions were first outlined in the September order. The U.S. granted subsequent blanket exemptions, regardless of the status of countries’ trade negotiations with the Trump administration, after announcing several trade deals. Following the exemptions on agricultural tariffs, Trump announced on Monday a $12 billion relief aid package for farmers hurt by tariffs and rising production costs. The money will come from an Agriculture Department fund, though the president said it was paid for by revenue from tariffs (by law, Congress would need to approve spending the money that tariffs bring in). In addition to the exemptions from Trump’s reciprocal tariffs, more than $300 billion of imports are also exempted as part of trade deals the administration has negotiated in recent months, including with the European Union, the United Kingdom, Japan and more recently, Malaysia, Cambodia and Brazil. The deal with Brazil removed a range of products from a cumulative tariff of 50 percent, making two-thirds of imports from the country free from emergency tariffs. For Canadian and Mexican goods, Trump imposed tariffs under a separate emergency justification over fentanyl trafficking and undocumented migrants. But about half of imports from Mexico and nearly 40 percent of those from Canada will not face tariffs because of the U.S.-Mexico-Canada free trade agreement that Trump negotiated in his first term. Last year, importers claimed USMCA exemptions on $405 billion in goods; that value is expected to increase, given that the two countries are facing high tariffs for the first time in several years. The Trump administration has also exempted several products — including autos, steel and aluminum — from the emergency reciprocal tariffs because they already face duties under Section 232 of the U.S. Trade Expansion Act of 1962. The imports covered by those tariffs could total up to $900 billion annually, some of which may also be exempt under USMCA. The White House is considering using the law to justify further tariffs on pharmaceuticals, semiconductors and several other industries. For now, the emergency tariffs remain in place as the Supreme Court weighs whether Trump exceeded his authority in imposing them. In May, the U.S. Court of International Trade ruled that Trump’s use of emergency authority was unlawful — a decision the U.S. Court of Appeals upheld in August. During oral arguments on Nov. 5, several Supreme Court justices expressed skepticism that the emergency statute authorizes a president to levy tariffs, a power constitutionally assigned to Congress. As the rates of tariffs and their subsequent exemptions are quickly added and amended, businesses are struggling to keep pace, said Sabine Altendorf, an economist with the Food and Agriculture Organization of the United Nations. “When there’s uncertainty and rapid changes, it makes operations very difficult,” Altendorf said. “Especially for agricultural products where growing times and planting times are involved, it’s very important for market actors to be able to plan ahead.” ABOUT THE DATA Trump’s trade policy is not a straightforward, one-size-fits-all approach, despite the blanket tariffs on most countries of the world. POLITICO used 2024 import data to estimate the value of goods subject to each tariff, accounting for the stacking rules outlined below. Under Trump’s current system, some tariffs can “stack” — meaning a product can face more than one tariff if multiple trade actions apply to it. Section 232 tariffs cover automobiles, automobile parts, products made of steel and aluminum, copper and lumber — and are applied in that order of priority. Section 232 tariffs as a whole then take priority over other emergency tariffs. We applied this stacking priority order to all imports to ensure no double-counting. To calculate the total exclusions, we did not count the value of products containing steel, aluminum and copper, since the tariff would apply only to the known portion of the import’s metal contentand not the total import value of all products containing them. This makes the $1.7 trillion in exclusions a minimum estimate. Goods from Canada and Mexico imported under USMCA face no tariffs. Some of these products fall under a Section 232 category and may be charged applicable tariffs for the non-USMCA portion of the import. To claim exemptions under USMCA, importers must indicate the percentage of the product made or assembled in Canada or Mexico. Because detailed commodity-level data on which imports qualify for USMCA is not available, POLITICO’s analysis estimated the amount that would be excluded from tariffs on Mexican and Canadian imports by applying each country’s USMCA-exempt share to its non-Section 232 import value. For instance, 38 percent of Canada’s total imports qualified for USMCA. The non-Section 232 imports from Canada totaled around $320 billion, so we used only $121 billion towards our calculation of total goods excluded from Trump’s emergency tariffs. Exemptions from trade deals included those with the European Union, the United Kingdom, Japan, Brazil, Cambodia and Malaysia. They do not include “frameworks” for agreements announced by the administration. Exemptions were calculated in chronological order of when the deals were announced. Imports already exempted in previous orders were not counted again, even if they appeared on subsequent exemption lists.

Ukraine’s allies are racing to reinforce Kyiv’s position ahead of talks between Donald Trump and Russian President Vladimir Putin, amid concern that the two leaders could stitch up a bad ceasefire deal that would weaken all of Europe.  European leaders aim to agree on a three-pronged package of support for Ukrainian President Volodymyr Zelenskyy to give him the strongest possible hand in negotiations over any potential truce. Their strategy includes more funding to Kyiv, more arms for Ukraine, and moves to hit Russia’s economy with new sanctions, according to diplomats and officials preparing for the Brussels summit. The renewed urgency among Kyiv’s allies comes after Trump once again flipped his position on the war, saying he’d be open to freezing the conflict along its current battle lines — less than a month after he suggested Ukraine could win back all its territory. His comments have revived concerns that he could force Zelenskyy to hand over territory to Russia. That outcome, European officials say, would be a disaster, not just for Ukraine but also for them.  “We see President Trump’s efforts to bring peace to Ukraine. Of course all these efforts are welcome, but we don’t see Russia really wanting peace,” top EU diplomat Kaja Kallas told reporters in Luxembourg on Monday. “Russia only understands strength.”  Zelenskyy said that European leaders will ask Trump to provide long-range Tomahawk cruise missiles to Ukraine, after he came away from a meeting with the U.S. president empty-handed last week. Aside from arming Ukraine, EU countries are close to agreement on two other critical planks of their support: a 19th round of economic sanctions to hit Putin’s war chest, and a raid on Russia’s frozen financial assets to unlock some €140 billion for Ukraine.  Diplomats expect Zelenskyy will address leaders at Thursday’s summit, either in person or via video call, to rally their support. Other allies including the U.K.’s Keir Starmer are planning a broader discussion among the so-called coalition of the willing later this week.  “I firmly believe that Ukraine must be in the strongest possible position before, during and after any ceasefire, and that’s why I’m convening the Coalition of the Willing call this week,” Starmer said Monday. “We must be resolute in our support for Ukraine, and I’m committed to intensifying our efforts to cripple Putin’s war machine.” THE SHADOW OF ORBÁN The European efforts come at a pivotal moment in Ukraine’s three-and-a-half-year war against invading Russian forces. Looming over Thursday’s European Council summit will be the shadow of a planned meeting in Budapest in the coming weeks between Trump and Putin to discuss the terms of a possible truce — an initiative that follows Trump’s hitherto successful efforts to broker a ceasefire in Gaza. Hungarian leader Viktor Orbán is an ally of Trump who has remained on good terms with Putin throughout the war, to the consternation of other EU leaders. He has repeatedly held up EU sanctions against Russia and called for “peace,” arguing that Ukraine’s war is not Europe’s to fight. Some EU leaders will be lobbying to attend the Trump-Putin meeting as well as to ensure Zelenskyy has a seat at any negotiations, according to one diplomat familiar with the matter, who like others quoted here was granted anonymity to speak candidly. Zelenskyy said on Monday he would be willing to go to Budapest if he’s invited.  For Europeans, the big fear is that Trump will again side with Putin in determining what peace will look like and will pressure Zelenskyy to accept Russian terms — potentially ceding swaths of territory in the east of the country. They worry that Putin’s two-hour call with Trump left the U.S. president less willing to help Zelenskyy when they met in Washington last week. Hungarian leader Viktor Orbán is an ally of Trump who has remained on good terms with Putin throughout the war, to the consternation of other EU leaders. | Thomas Traasahl/EPA There’s also widespread skepticism among EU diplomats that Putin is at all serious about engaging in peace talks. Many see his offer to meet Trump again as another stalling tactic to buy time while he continues to bombard Ukraine with intensifying missile and drone attacks.  MAKING PUTIN PAY One key initiative that leaders will discuss this week is a plan to exploit €140 billion in frozen Russian assets held in Europe, to provide what officials are calling a “reparations loan” to Ukraine. The money would only be repaid to Moscow in the unlikely event that Russia pays war damages to Ukraine in the future, under the outline proposals European officials have readied.  Belgium, where the biggest share of these assets is held, has been anxious about the potential reputational damage the country could suffer in the financial sector if the cash deposits are raided.  Other countries have voiced concerns about the potential risk to the euro’s international credibility and want the U.S. and Japan, among other countries, to adopt similar policies.  On Thursday, EU leaders are due to decide whether they should formally request that the European Commission draft the legal proposals for creating the reparations loan in full. Officials working on the summit preparations believe Belgium’s Prime Minister Bart De Wever will agree to let the Commission, the EU’s executive, go ahead and draw up the legal plan. He would still be able to block it at a later date.  “We expect the European Council to take a political decision here to use these frozen Russian assets and to mandate the Commission to submit appropriate legislative proposals,” a German government official said. But the fact that the plan was progressing would again pressure Putin and give Ukraine the hope that the EU would be able to meet its funding needs for two or three more years, diplomats said. “If we send the message that we are willing and able to support Ukraine for the next two or three years, that will enter into their calculations when they’re discussing peace,” one diplomat added.  Meanwhile, Kallas suggested that EU leaders would sign off this week on the bloc’s 19th package of sanctions, designed to hit foreign banks and cryptocurrencies that Russia uses to evade sanctions. Slovakia’s leader Robert Fico had been holding up the sanctions to protest efforts to shut off the flow of Russian gas, which his country still relies on for energy. Diplomats involved in the negotiations said a deal is now close to secure Fico’s support. LAND GRAB FEARS  The more fundamental anxiety among EU governments is that Trump might be swayed by Putin to pressure Kyiv into giving up land in eastern Ukraine. Trump suggested the war should be frozen on its current territorial lines, with what he said was “78 percent” of the Donbas region in Russian hands. “You leave it the way it is right now, they can negotiate something later on down the line,” Trump said.  The EU’s Kaja Kallas rejected the idea of any peace deal that forced Ukraine to give up Russian-occupied land. | Olivier Hoslet/EPA But the diplomat quoted earlier warned that if Putin wins land, the EU’s Baltic states of Estonia, Latvia and Lithuania, among others, will “freak out” and worry that Russia will come for them next. The result would be “a massive rearmament” in many European countries that would upend their internal politics, the diplomat said. The EU’s Kallas rejected the idea of any peace deal that forced Ukraine to give up Russian-occupied land. “Everybody says territorial integrity is an important value that we stand for,” Kallas said. “We have to keep to that, because if we just give away the territories then, this gives a message to everybody that you can just use force against your neighbors and get what you want.” Esther Webber, Koen Verhelst, Gregorio Sorgi, Gabriel Gavin, Clea Caulcutt, Jamie Dettmer and Jacopo Barigazzi contributed reporting.

The Justice Department on Monday announced the seizure of hundreds of financial accounts, fraudulent websites and laptops linked to a massive scheme by North Korean operatives posing as remote workers to infiltrate top tech companies and funnel money back to Pyongyang’s weapons program. The major government crackdown follows recent findings by cybersecurity experts revealing that several Fortune 500 firms were impacted by the intricate plot, which involves North Korean operatives using stolen identities and sophisticated AI tools to sail through the interview and hiring process. The cyber operation has grown more prolific as remote work in the U.S. has exploded, particularly in response to the Covid-19 pandemic. According to the DOJ, around 100 U.S. companies have unknowingly hired workers tied to the North Korean regime, who have also used their access to company systems to steal U.S. intellectual property and virtual currency. One company targeted was an unnamed California-based defense contractor that worked on artificial intelligence-powered equipment. Some of its technical data and files were compromised and sent abroad. “Any government contracting company utilizing remote work could be a potential victim in the future,” said an FBI official, granted anonymity as a condition of speaking to reporters ahead of the announcement. These North Korean agents are often aided by individuals running so-called laptop farms across the U.S. According to the DOJ, 29 known or suspected laptop farms across 16 states were searched. Around 200 laptops were seized by the FBI, along with dozens of financial accounts and fraudulent websites used to launder money. Individuals from the U.S., China, United Arab Emirates and Taiwan, helped North Korean agents successfully embed themselves inside U.S. companies, the press release states. U.S. national Zhenxing Wang was arrested and indicted for his involvement in a multiyear plot that allowed overseas operatives to obtain remote IT work with U.S. companies, generating more than $5 million in revenue. The scheme involved stealing the identities of around 80 U.S. citizens. “North Korean IT workers defraud American companies and steal the identities of private citizens, all in support of the North Korean regime,” Assistant Director Brett Leatherman of the FBI’s Cyber Division said in a statement. “Let the actions announced today serve as a warning: if you host laptop farms for the benefit of North Korean actors, law enforcement will be waiting for you.” In addition, four North Korean nationals were separately indicted for allegedly stealing $900,000 in virtual currencies from two unnamed companies based in Georgia. The DOJ has previously taken action against these schemes, including arresting multiple U.S. nationals running the laptop farms over the past year. One American woman pleaded guilty in February to hosting a laptop farm from her home, which allowed overseas IT workers to receive more than $17.1 million for their work. The State Department continues to offer a $5 million reward for information that could disrupt North Korean financial and other illicit activities.

Law enforcement agents in four countries carried out coordinated raids on Wednesday targeting fraudulent Chinese imports to the EU, the European Public Prosecutor’s Office announced Thursday. The EPPO-led investigation alleges that criminal networks defrauded the EU of an estimated €700 million through large-scale customs and VAT fraud involving textiles, shoes, e-scooters, e-bikes and other goods imported from China, the EPPO said in a statement. The proceeds were then laundered and sent back to China, it said. Authorities conducted 101 searches on Wednesday across Bulgaria, Greece, France and Spain, the EPPO said.  Ten suspects, including two customs officers, were arrested, and law enforcement seized €5.8 million in various currencies, 27 vehicles, luxury items, 11 properties, and thousands of shipping containers and e-vehicles, according to the EPPO. The goods in the scheme were mainly brought in through the Piraeus Port in Greece, investigators said. In 2019, the EU’s anti-fraud investigators found that customs officials at the Chinese-owned Piraeus failed to stop fraudulent imports.  The imports were substantially undervalued or misclassified to evade customs duties, and their destinations were falsified to avoid paying VAT in the country of entry. EPPO alleges the goods were then transported using false documents to France, Italy, Poland, Portugal and Spain, where they were sold on the black market.

Europe’s leaders are getting excited by the idea that Donald Trump’s erratic policymaking is going to hasten the end of U.S. dominance of the world’s financial system, but their meeting on Thursday will remind them how far they still are from being able to exploit the situation. In his invitation to national government heads, European Council President António Costa said the meeting would be “a good opportunity to consider how to further strengthen the international role of the euro” — code for the long-term goal of making the euro a global reserve currency to rival the dollar. Amid signs that the U.S. president has shaken global confidence in the dollar, some are seeing a rare opportunity to compete for the power and prestige that reserve currency status bestows. Europe’s comparatively sound economic policies and strong rules-based institutions could give the euro a competitive edge over the dollar, European Central Bank President Christine Lagarde said in a speech last month proclaiming “a global euro moment.” However, the most obvious single step that would instantly make the euro more attractive to world investors is one that leaders have fallen out over many times before and are likely to again: large-scale joint borrowing. “If Europe is going to offer investors an alternative, it needs to increase the size of the Eurobond market dramatically,” former International Monetary Fund Chief Economist Olivier Blanchard and Ángel Ubide, economist at Citadel, wrote last month in a joint paper, which has drawn much admiring commentary, including from senior figures at the ECB. The paper revives a proposal first made in 2010 to divide the government debt market in two: all national government bonds up to 60 percent of gross domestic product would be swapped into ‘blue bonds’ guaranteed by the EU, while member countries would stay responsible for all the debt above that level (‘red bonds’).  In theory, this would allow Europe to create, at a stroke, a large, liquid pool of safe assets that would finally offer global investors a real alternative to buying U.S. Treasuries: something that offers a steady return with no credit risk, something they can hold forever or turn into cash in an instant if need be, somewhere to park their money while looking for the next big investment in stocks or real estate, something to use as collateral for their next loan. The absence of a large market for such assets today means that it is gold, rather than the euro, that has benefited from the dollar’s weakness since the start of the year. THIS TIME IS DIFFERENT? Joint debt has long been an option for making Europe’s capital market more attractive and competitive, but it has always been contentious.  During the eurozone sovereign debt crisis, leaders notably from Italy and Spain pushed for Eurobonds, trying to bring down their borrowing costs. It never happened because their frugal northern neighbors, led by Germany and the Netherlands, argued that that would leave them on the hook for spending they never approved. The EU has tried to address such ‘moral hazard’ by creating and policing a set of rules that would cap national governments’ borrowing. But those rules were suspended during the pandemic and have only been restored in a fashion that is watered-down and hard to enforce. Blanchard and Ubide argue that the world has moved on since 2010, and that the idea deserves another look. Ubide told POLITICO that Europe’s successful experience with joint debt during the pandemic suggests that this time may be different. While Ubide recognized that “there will surely be a debate about immediate costs and benefits for some countries,” he stressed that the plan will benefit all countries over the medium run. Certainly, the calls for more economic and financial integration have become louder than ever, as the extent to which a stunted capital market is hurting Europe’s broader competitiveness has become clear. As former Italian Prime Minister Enrico Letta argued in a recent opinion piece, “in a world in which economic power is increasingly weaponized through sanctions, trade restrictions and financial coercion, this is no longer just an economic issue — it is a question of sovereignty.” The argument is getting some recognition in Germany and the other ‘frugal’ states, which not only backed joint debt issuance in response to the pandemic, but also approved the SAFE (Security Action for Europe) program this year. SAFE will allow the EU to issue €150 billion in new bonds to finance cheap long-term loans to member states for coordinated military procurement.  OLD HABITS DIE HARD But even the new government of Chancellor Friedrich Merz stresses those were temporary and exceptional measures. And while Merz has radically adjusted domestic policy to new realities with a dramatic U-turn on Germany’s strict spending rules, that does not necessarily mean he will be equally flexible on joint borrowing. A spokeswoman said that Berlin does not support proposals for blue bonds and sees “no reason for discussion of the topic” this week. “Merz has already crossed a red line for the German conservatives by largely suspending the national debt brake,” said Berenberg chief economist Holger Schmieding.  “This has already cost his party several percentage points of support and given the [far-right] AfD a further boost.”   A senior German government official did not rule out the possibility of more Eurobonds to finance spending on defense, a common public good, but he noted that that is an issue for negotiations on the EU’s next budget framework, starting in 2028.  Likewise, the current Dutch minority government has no appetite for anything radical on joint borrowing in the near term.  “The cabinet is not in favor of common debts for new [Eurobonds],” a spokeswoman said, adding that a large majority in parliament is also against the idea.  In the markets, meanwhile, frustration is mixed with resignation.  “We can continue to preach,” said UBS Investment Bank’s chief European economist, Reinhard Cluse, but “I’m not holding my breath.” Nette Nöstlinger and Geoffrey Smith contributed to reporting

PARIS — France isn’t getting rid of cash, Justice Minister Gérald Darmanin clarified on Friday after telling lawmakers a day earlier that the move would help stop drug trafficking. In an interview with radio station RTL, Darmanin recognized that getting rid of banknotes was unpopular and that the government lacked the “political means” to take a move that would significantly affect the everyday lives of millions of people. Darmanin said a debate on the future of cash would require “a lengthy discussion with French people,” especially to address the concerns of small businesses and older citizens. The 42-year-old added that a presidential campaign — which he is already laying the groundwork for ahead of the 2027 contest — could be the right avenue for such a discussion. A 2023 senatorial report estimated that illegal drug trafficking in France is worth between €3.5 and €6 billion yearly, and that most of this revenue comes from “small daily purchases using small banknotes.” The French state only recovers a few million euros of that amount each year, Darmanin said, adding that other forms of payment —included cryptocurrency — are easier for investigators to track. The right-leaning justice minister, who spent years as interior minister before taking on his new role last December, has long advocated tough-on-crime policies. In the same RTL interview, he also backed the use of facial recognition technology in public spaces to identify individuals wanted by the police.

The International Monetary Fund sharply downgraded its U.S. growth forecast, while also lowering its outlook for the eurozone and China on the back of President Donald Trump’s tariff blitz.  The U.S. is now seen as growing by 1.8 percent this year, a 0.9 percentage point reduction from its January estimate, according to the IMF’s new World Economic Outlook, which is published twice a year. Growth forecasts for other major economies also were revised downwards: the eurozone saw growth knocked down by 0.2 percentage points and China by 0.6 percentage points.  The IMF’s latest forecast gives more ammunition to critics of Washtington’s trade policy who allege that the U.S. will be the biggest loser in a trade war. Mexico was the only large economy that saw a sharper downgrade, with a 1.7 percentage point negative revision for 2025.   The IMF pointed to how gauges of consumer, business and investor sentiment have all started to flash red since the U.S. administration launched its “Liberation Day” tariff package on April 2. “[S]entiment was optimistic at the beginning of the year but has recently shifted to a notably more pessimistic stance as uncertainty has taken hold and new tariffs have been announced,” reads the report.  The Fund has lowered its forecast for economic growth across all advanced economies to 1.4 percent this year, from 1.9 percent at its last quarterly forecast update in January. For the world at large, it now sees growth of only 2.8 percent this year, down from 3.3 three months ago. Despite the downgrades, the U.S. is still expected to outperform the eurozone. The currency area is expected to grow by 0.8 percent in 2025, and 1.2 percent in 2026. Germany, its largest economy, is seen stagnating once again this year, with growth expected to pick up to 0.9 percent in 2026. The IMF flags Berlin’s decision to loosen its fiscal rules, as well as a pick-up in wages, as helping to fuel growth next year.  In China, a combination of a downturn in its real estate market as well as domestic imbalances towards exports has contributed to its mounting economic difficulties. Tariffs have “disproportionately” hurt the Asian economy, according to the IMF, which notes that a rebalancing towards greater domestic consumer demand is stalling.  Beyond harm to individual economies, the multilateral lender also warns of a potential unravelling in the financial markets, which have stayed volatile since April 2. Major stock market indices, most of all in the U.S., are well below their pre-“Liberation Day” levels. They could go still lower. The dollar has also seen its value relative to other major currencies eroded, another red flag.  “The U.S. dollar would typically be expected to appreciate if financial conditions deteriorate sharply,” reads the report. “But the international monetary system could experience a sudden reset, with potentially major implications for the dollar as its main pillar.”   The lender warned of potential social consequences of the further unravelling of the economic order, with populations already smarting from the recent bout of inflation and the cost-of-living crisis that followed at risk of “polarization and social unrest.”

MEET THE MAFIA-BUSTING MEP TAKING THE FIGHT AGAINST ORGANIZED CRIME TO BRUSSELS Giuseppe Antoci battled the Italian mob. But can he take on EU policymaking? By ELENA GIORDANO and ALESSANDRO FORD in Sicily, Italy Photo-illustration by Matt Needle for POLITICO As he sat waiting for the barriers to lift, Giuseppe Antoci’s mind raced. The Italian politician was in the back seat of the car, flanked by his security detail, who had stepped out to surround him while the train rumbled past. The road was quiet, the cool December night still. The lack of street lighting made it impossible to see what could be waiting in the dark as he made his way home. “Stopping at a level crossing is never a good thing for us,” he said. Advertisement After what felt like an age, the train passed. The security guards got back in the car, the barriers lifted and they continued on their way. It’s moments like these that the 58-year-old fears. Eight years ago, while driving home under police escort, he and his guards narrowly survived a mob ambush, retribution for his national anti-corruption drive. “The mafia, you see, does not forget,” he said. “If they want to get back at you, they find the way.”  Antoci, a folk hero in Italy for his anti-mob activism, is familiar with taking on mafia activities at home — and braving the risks. In Italy, he successfully campaigned to tighten background checks on EU farm subsidies, after discovering large-scale mafia fraud to co-opt EU cash. Now, Antoci has set his sights on a loftier goal: enacting the checks at the EU level and driving the bloc’s crackdown on organized crime and money laundering. Advertisement Elected on an anti-establishment wave in last June’s European election, he arrived in Brussels with the wind in his sails. But the obstacles are many: Antoci is far from being a seasoned EU policymaker, Brussels is relatively toothless on judicial and security policy, and the political winds mean the Commission is seeking to reduce, not grow, its regulatory role. Giuseppe Antoci has taken on Italy’s mob. But can he take on Brussels? ROAD TO POLITICS Meeting Antoci isn’t like meeting other European lawmakers. There’s no coffee at the Parliament bar, no chitchat on the margins of a committee session. POLITICO was brought to a secluded hallway covered by CCTV cameras. Grim-faced men opened the door, bulges on their belts. The walls were lined with decorations and honorary diplomas; the window faced an ugly, concrete block — a necessity against snipers. For all that, he was warmly accommodating, a squat, shaven-headed figure smiling at us through rimless glasses. He starts by telling us his story. Antoci grew up in Sicily during the “Years of Lead”: when political and criminal violence wracked the country and the island’s homegrown mafia, the Cosa Nostra, declared war on the Italian state. A dedicated pupil, he kept his head down, studying economics at the University of Messina. Antoci wants to elevate his battle against the mafia to a new level. | Alexis Haulot/EP From there, he entered banking, eventually becoming a regional director and starting a family. He and his wife raised three daughters in a villa in Santo Stefano di Camastra, a town on the northern coast. It was a rich life and Antoci says he never aspired to enter the political limelight. Now, that big house — in which he’d pictured hosting friends at roaring dinner parties — is guarded by the military. Nobody, outside of his family members, can get near it.  “All these plans … they all went up in smoke,” he said, with a wistful edge to his voice. In 2013, Antoci took a new job: president of Nebrodi Park, the largest natural protected area in Sicily. Advertisement “It’s a fantastic place,” he said. “There are spots from which you can see behind you the volcano of Etna, and in front of you the forests, the lakes and the Aeolian Islands, all at the same time.” It was during his tenure at Nebrodi that he came to face-to-face with the mafia for the first time. As he soon discovered, 80 percent of the park’s leases were controlled by Sicilian mob families. Agricultural fraud was rife: Mafia were stealing millions of euros every year from the Common Agricultural Policy, the EU’s €45 billion-a-year farm subsidy pot, by intimidating farmers and preventing competition. For the families, it was easy money: clean capital, deposited into their bank accounts each month. The scheme was so simple that mafiosi even put their relatives’ names on the paperwork. Matteo Messina Denaro, the country’s most wanted mafia boss, had two sisters on subsidies for 30 years, according to a recent investigation by Farm Subsidy, a watchdog website. For Antoci, there was an obvious fix: Background checks on those applying for funds must be tightened. His efforts did not go unnoticed. In 2014, two days before Christmas, Italian authorities discovered through wiretapped conversations that members of Mafia clans were planning to kill Antoci and his family, and immediately placed them under police protection. Within hours, military personnel were surrounding his home. “They probably saved my life,” he said. Two years later, when Antoci was driving home under police escort, his guards noticed the road ahead was blocked. Large rocks had been places across the asphalt. Advertisement As soon as the car stopped, masked men emerged from the bushes on either side of the road and started shooting at the vehicle. Antoci’s security guards shot back. The shooters knew the vehicle was armored and had prepared Molotov cocktails. But when a second car from Antoci’s security detail arrived from behind, the men — thinking their plot had been discovered by authorities — fled. Bullet holes on the car that was transporting Antoci on May 18, 2016. | Francesco Saya/EFE via EPA The incidents left their mark on Antoci. “There are nights when I can’t sleep because I hear the shootings in my head,” he said. The failed hit provoked an uproar in Italy, where Antoci became the first public servant to be attacked since 1992, when the Cosa Nostra assassinated Italian magistrates Giovanni Falcone and Paolo Borsellino. The assailants were never captured, but the following year, parliament voted the Antoci protocol into law. Since then, hundreds of mafiosi and their accomplices have been caught and convicted for defrauding the CAP. Advertisement Antoci was himself courted by all of the country’s main parties. Initially he turned down their offers — the timing just wasn’t right, he told POLITICO. But come 2024, Antoci had change back in his sights. “If I give up this fight because I’m afraid, it means they’ve won. And I can’t let that happen,” he said. He was elected as a member of the European Parliament with the 5Star movement, the left-populist party of former Italian Prime Minister Giuseppe Conte. A ‘DELICATE MOMENT’ FOR EUROPE Antoci’s arrival in Brussels comes at a critical time. European organized crime is turning more violent, as cocaine traffickers vie for a market worth €11 billion, equal to the diamond trade. Gangs have graduated into paramilitaries, buying more weapons and muscle, assassinating lawyers and recruiting children. These once-local groups are also going transnational, spanning currencies and continents. Gang-related homicides have spiked as a result, turning public security into an electoral issue in France, the Benelux and Scandinavia. This arguably contributed to the success in last year’s European election not just of transparency campaigners like Antoci, but also far-right, “tough on crime” candidates from Marine Le Pen’s National Rally in France, Geert Wilders’ Party for Freedom in the Netherlands, and Tom van Grieken’s Vlaams Belang in Belgium. It was to them that Commission President Ursula von der Leyen was likely appealing when she promised in July that, if re-elected by the new MEPs, she would “respond to this growing threat on a European level,” including by doubling the staff of Europol, the EU agency for law enforcement cooperation. Advertisement  “It’s a very delicate moment,” Antoci said, noting the huge amounts capitals are still spending from the €723 billion Covid-19 recovery fund. “If we get this piece of Europe’s history wrong, we risk funneling enormous sums into the hands of organized crime, and it could take us 30 years to recover.” It’s a message shared by top security officials: nearly 90 percent of the bloc’s crime syndicates have successfully infiltrated the legal economy, according to a recent Europol report. The EU’s usual approach involves pushing paper and that’s important, too. The 2003 European Arrest Warrant Act has led to the capture of over 50,000 alleged criminals since it began. The 2014 European Investigation Order has dramatically sped up cross-border collaboration between law enforcement. The six reforms of the anti-money laundering directive have granted EU countries the world’s best risk ratings, and last year the bloc formed common rules to freeze and confiscate illicit assets.  Police investigators work near the scene of an explosion at a bar in Grenoble, France. | Maxime Gruss/AFP via Getty Images These were landmark laws and the Sicilian MEP wants more of them. He is already working on the 2023 EU anti-corruption directive as a “shadow rapporteur” — Brussels lingo for a political group’s representative on a file. The draft legislation is at final debate between the Parliament and Council. “In the end, we have to ‘follow the money,’” emphasized the former bank director, quoting Falcone.   Antoci’s main goal for the next four and a half years as an MEP is to transform his Protocol Antoci — which tightens background checks for applicants of EU funds — into a European-wide standard. It’s a move he believes would make history. After that Antoci hopes to expand collaboration between, and funding for, Europol, Eurojust and the European Public Prosecutor’s Office; to endorse public health approaches to drug consumption; and to harmonize rules on prisons.  Advertisement The last is particularly important to him, as he believes it’s crucial for the bloc to adopt Italy’s “41-bis” legal article, which suspends certain rights for imprisoned mafiosi (such as no telephone calls, restricted visitation rights, limited time with other prisoners). Though criticized as draconian, Italians tend to see 41-bis as a necessary evil to stop capos continuing to operate from behind bars. The idea had never attracted enough support from other countries to reach the European level, but that may be changing. The Netherlands is reconsidering its stance after the lack of such legislation allowed Europe’s top drug trafficker, Ridouan Taghi, to order the assassination from prison of a witness’s brother and lawyer in 2019, and media adviser in 2021. Taghi’s cousin has been convicted of passing on execution orders and his lawyer is currently on trial. A cell in the Dendermonde prison in Belgium, inaugurated in 2023. | Nicolas Maeterlinck/Belga via AFP/Getty Images Antoci’s initiatives have also won the support of the EU’s new Commissioner for Internal Affairs Magnus Brunner. During his confirmation hearing last November, Brunner praised Antoci as “a source of inspiration” and expressed his intention to revise the EU’s legislation on the fight against organized crime, which he called “outdated.” “We need new rules and new provisions to deal with transnational criminal activities which threaten the lives of citizens, the rule of law and the legal economy. That’s why I foresee an update of this legislation,” Brunner said in response to Antoci’s question during the hearing. BREAKING BRUSSELS There are, however, several major obstacles to Antoci’s ambitions. The first one is that Brussels has little power over judicial and security policy. As sensitive issues, these areas are jealously guarded by member states, meaning the bloc has a weak, shared “competence” (read: jurisdiction) over them.  “The EU doesn’t have any teeth really in terms of organized crime,” said Andrew Cunningham, head of markets, crime, and supply at the EU Drugs Agency. Regulation often represents the lowest common denominator, setting a minimum standard, and right now the Commission is on a deregulatory drive, cutting as much red tape as it can.  Advertisement The Parliament, meanwhile, is even weaker. “As it is currently conceived [it cannot] do much other than promote legislative initiatives and cooperation strategies,” said Vincenzo Musacchio, professor of criminal law and associate at the Rutgers Institute on Anti-Corruption Studies. “An MEP can do little in practice” and “certainly cannot effectively influence the approval of ad hoc anti-Mafia laws.” The second problem is that Antoci is politically isolated. He is a single MEP from a relatively small party in a minor group. His choice of faction affords him no prominent posts in any committees. And as a novice politician, he has no experience of the backroom bargaining or corporate lobbying so intrinsic to making policy in the bubble.  The Sicilian politician says he joined the 5Star Movement for its anti-mafia credentials. Two others had gone before him: Federico Cafiero de Raho, Italy’s top anti-mafia prosecutor until 2022, and Roberto Scarpinato, formerly Palermo’s top magistrate. The party’s leader, Giuseppe Conte, “made me understand that saying ‘no’ is not an innocuous choice,” concluded Antoci. Antoci claims that he is living his experience as MEP like “an act of service” to society. | EP This leads to the third problem. There is a real risk that the Sicilian anti-mafia campaigner becomes a glorified mascot for colleagues to take selfies alongside — and indeed powerbrokers are already lining up with their iPhones. Commission President Ursula von der Leyen, Parliament President Roberta Metsola, as well as a succession of committee chairs, lawmakers and ambassadors have all snapped pics with the affable Antoci. Whether they then support his proposals remains to be seen. Antoci had a predecessor in the Parliament: another 5Star Movement MEP from Sicily, named Ignazio Corrao. “A most dedicated man,” remembers Antoci. From 2014 to 2024, Corrao advocated for many of the same ideas that his replacement is now promoting. He was the rapporteur on the anti-money laundering law, he denounced mafia theft from the CAP, he called for more cross-border judicial collaboration. Little changed. ACT OF SERVICE Watching Antoci speak to a group of high school students in Gela, a southern Sicilian town long plagued by the Cosa Nostra, one can wonder whether that matters. Can a standard-bearer be just as important as a soldier? “Take an active part in society, get involved in politics,” Antoci urges the students, adding that the younger generation should be watchdogs for their elected representatives.  “Let them tell you what they are working on, how they work and which file they are studying.” After eight months in office, Antoci feels confident that moving to Brussels and joining the European Parliament was the right move, the necessary step to elevate his battle against the mafia to a new level. Advertisement He claimed that he is living his experience as MEP like “an act of service” to society, working relentlessly, and that he barely has time for lunch. “Unlike the colleagues from the third floor,” he joked, referring to those spending their time at the bar on the third floor in the European Parliament building.  However, he admitted, he often misses the direct connection with his homeland and its people that he had before relocating to Brussels. He stressed that the most meaningful work of a politician comes from listening to people and understanding the issues that affect their communities. Reflecting on his decision to continue fighting the Mafia — despite the risks to his life and to his family — Antoci said it has all been worth it.  “Who would I be if I would have given up?” he said. “I would have felt really dirty for the rest of my life.”

President Donald Trump’s announcement that he was imposing broad and hefty tariffs on goods from Mexico, Canada and China provoked a predictably swift outcry. But there is one aspect of the move that has not received nearly enough attention. It’s not really about trade. It’s about power. Trump levied tariffs during his first term, but this time is different. That’s because on Monday, Trump invoked a law — the International Emergency Economic Powers Act — that has never been used to impose tariffs before, let alone tariffs of this breadth and magnitude. (The Mexico and Canada tariffs were quickly put on hold before going into effect, though Trump could always resuscitate them, and he is apparently planning to open up another front in his trade wars by imposing similar tariffs on goods from the European Union. The China tariffs, meanwhile, are still on.) Scholars of trade law say the move will likely be challenged in court because it arguably exceeds the presidential authority established under the Constitution, though whether this Supreme Court would rule against Trump is far less certain. If he succeeds, Trump will end up fundamentally altering the balance of power between the three branches of the federal government — giving him and future presidents tremendous power to impact the global and domestic economies without any input from the elected representatives of Congress. And Republicans who go along with this gambit may regret it later on if and when a President Alexandria Ocasio-Cortez or a President Pete Buttigieg deploys these powers. When Trump imposed tariffs during his first term, he cited authority under other laws, like the Trade Act of 1974 and the Trade Expansion Act of 1962. At one point he threatened to invoke the IEEPA to impose tariffs on Mexican goods, but he never followed through, perhaps amid concern it would have been seen as legally dubious. That’s because the IEEPA is typically used to impose sanctions — not tariffs — on other countries. But Trump’s decision to use the IEEPA this time, when he’s aggressively flexing his executive authority, may be no accident: Unlike other trade laws, the IEEPA has the fewest procedural requirements and safeguards. It gives the president the power to regulate or prohibit a broad swath of economic activity in order “to deal with any unusual and extraordinary threat” that is based largely outside the United States and concerns “the national security, foreign policy, or economy of the United States.” In the executive orders that announced the tariffs on Canada, Mexico and China, Trump invoked the opioid crisis, as well as illegal immigration from Canada and Mexico. By contrast, when Trump imposed tariffs during his last term, including on certain products from China, the statutes he used required his administration to first conduct investigations through either the International Trade Commission, the Department of Commerce or the U.S. Trade Representative. Those processes can take months and require specific determinations under each statute — for instance, that the imports at issue are the substantial cause of serious injury to a domestic industry — and in some cases require the executive branch to consult with Congress. As the Congressional Research Service notes, “The focus of these laws is not to provide additional sources of revenue, but rather to alter trading patterns and address specific trade practices.” No president has ever used the IEEPA to impose tariffs before. In fact, the IEEPA was passed as part of a broader effort by Congress in the 1970s to limit the president’s ability to exercise emergency economic powers. The framework ultimately created, however, completely fails to rein in the president, according to Timothy Meyer, a law professor and expert on international trade law. And Trump is taking advantage of that failure by pushing beyond what the Constitution intended. “This strikes me as unconstitutional,” Meyer told me. “It’s very difficult to see how the framers would’ve thought that it was constitutional for the president to simply have the power on the drop of a hat to impose an across-the-board 25 percent tariff on our major trading partners.” The Constitution gives Congress the authority to “lay and collect Taxes, Duties, Imposts and Excises.” Between Trump’s tariffs and his unilateral effort to halt federal spending, he has now effectively claimed that he has both taxing and spending authority — a government all his own. Congress barely even needs to exist in this framework. Trump may run into hurdles in the courts. There are both statutory and constitutional limits, and in due course, we may see lawsuits that try to invalidate the China tariffs and effectively preempt Trump’s ability to impose others. Those challenges would likely come from American businesses that have to pay the tariffs, and the most obvious forum would be the Court of International Trade, with any appeals going up to the Federal Circuit Court of Appeals and eventually the Supreme Court. What might that challenge look like? To the extent the president has any power in the area of taxes and tariffs, he gets it from statutes passed by Congress. Challengers could argue that the IEEPA, as a simple textual matter, does not give Trump the power to impose tariffs. The language of the statute is broad — the president can, for instance, prohibit “transactions in foreign exchange” and “the importing or exporting of currencies or securities” — but it does not explicitly give the president any authority to impose “tariffs” or “taxes.” Would that argument pass muster at today’s Supreme Court? It’s hard to know. There is enough vagueness in the statute that so-called conservative textualists — who typically refuse to consider congressional purpose or legislative history when interpreting statutes — could try to justify extending the authority given by Congress to tariffs and taxes as well, even though Congress could have written that language into the statute if it meant to. (If this makes textualism sound like an interpretive methodology that is ripe for abuse — that allows judges to make policy choices by selectively choosing how to read statutes under the guise of a neutral framework — then you have the right idea.) A considerably stronger argument against Trump’s tariffs draws on the Supreme Court’s so-called major questions doctrine. The Republican appointees on the court created this doctrine fairly recently, but it is now the law of the land. The doctrine requires more rigorous analysis and scrutiny of executive authority if the action passes some undefined threshold of “economic and political significance.” In that case, the executive branch is allowed to act only if it’s been given a clear directive from Congress. In 2023, the Republican appointees on the court relied on the major questions doctrine to throw out a large part of President Joe Biden’s student loan forgiveness program — which, they said, lacked sufficiently clear statutory authorization from Congress to justify a major policy change with wide-ranging economic effects. Under the emergency economic powers law, there is no clear delegation of taxing or tariff authority to the president. There is also little question that the tariffs that Trump has imposed — and apparently intends to impose — could have extraordinary impacts on the domestic and global economies. Just this week, Trump’s trade adviser Peter Navarro acknowledged as much in an interview with my POLITICO colleague Dasha Burns. “If President Trump succeeds like he wants to succeed,” Navarro said, “we are going to structurally shift the American economy from one overreliant on income taxes and the Internal Revenue Service, to one which is also reliant on tariff revenue and the External Revenue Service.” If, however, a conservative court wanted to rule in Trump’s favor on the tariffs, it could draw inspiration from the Supreme Court’s decision in 2018 upholding Trump’s travel ban on certain majority-Muslim countries. In that case, the Republican appointees signed off on a broad assertion of presidential authority, essentially ignoring Trump’s effort to target Muslims and deferring to him on the theory that a “travel ban” implicated national security and foreign policy concerns that the president is better suited to address than legislators or the courts. The Supreme Court’s major questions doctrine has developed since the decision on the travel ban and was used to thwart multiple Biden initiatives in the domestic context, including an eviction moratorium during the pandemic. Still, it’s possible the court could decide not to apply the doctrine in the realm of foreign affairs. As a matter of principle, it would be hard to justify that deviation. “It is really tough to see how some of the things that they have called major questions — the student loan issue, the eviction moratorium — are significant economic questions, but a 25 percent tax on two of our largest trading partners across the board is not, particularly when you’re talking about a statute that says nothing about tariffs specifically,” Meyer observed. Any litigation in this area, however, could move slowly. We have become accustomed to seeing courts quickly impose injunctions to stop executive actions that may be unlawful, but the legal standard requires the challengers to demonstrate that they will suffer “irreparable harm” in the absence of the injunction. Financial losses alone often do not qualify under that standard (on the theory that the plaintiffs can be made financially whole at the end of the case if they ultimately prevail in the ordinary course of litigation). -------------------------------------------------------------------------------- Congress has options here, and it should explore them quickly. The IEEPA contains a statutory mechanism for Congress to override Trump’s tariffs, but it would require it to pass a veto-proof majority joint resolution, which, given Trump’s grip on Republicans in the House and Senate, is practically inconceivable. Democrats are in the minority, of course, but they have procedural levers of influence. Just this week, Sen. Brian Schatz (D-Hawaii) said that he had put a blanket hold on State Department nominees in response to the administration’s assault on USAID. Democrats could also refuse to help Republicans pass spending bills and force a government shutdown — which could draw the public’s attention to this issue as well as the many other controversial actions that Trump has taken in his less than three weeks in office. On a longer horizon, Congress could pass a law that significantly constrains the president’s authority under the IEEPA — for instance, by narrowing the circumstances in which the president can declare an “emergency,” or, as with other trade statutes, by requiring the president to go through internal, agency-level fact-finding processes to study and justify any proposed actions under the statute before they take effect. One day, a Democrat will be back in the White House, and Republicans will be hungry for oversight when that happens. The other option is for Congress to do nothing. And if Trump were ultimately to prevail in the courts, he will have usurped extraordinary power from the legislative branch. It was no accident that the framers gave the power to tax and spend to Congress. These are incredibly complex issues that require difficult trade-offs and that have tremendous impacts on the American people. The framers got it right when they concluded that Congress — which is broadly and more directly responsive to the public than the president — should have this authority and that it should be up to it to decide whether and to what extent to delegate any of that power to the president. Trump’s tariffs are yet another executive overreach among many in his opening weeks. Here, too, Congress ignores this at its own peril.

BERLIN — Donald Trump makes light of trade wars, claiming they are easy to win. We’re about to find out if he’s right. The U.S. president has imposed tariffs of 10 percent on China from Tuesday, while Mexico and Canada won last-minute stays of execution on 25 percent tariffs. He’s also threatening to hit the European Union — a major exporter of cars, medicines and food to the United States. Trump says he wants to use the tariff weapon to halt the flow of fentanyl and illegal migrants across the northern and southern borders of the United States. To do so he has invoked emergency powers — even though the U.S. economy is growing strongly and is at full employment. He also wants to close the $1 trillion U.S. trade deficit with the rest of the world. Team Trump argues that throwing up a tariff wall will force companies to move investment and jobs back to the U.S. — think of all those silicon chips now made in Taiwan or iPhones made in China. But critics warn that Trump’s trade war will result in higher prices, lower growth, lost jobs and disrupted supply chains — both at home and abroad. They also argue that tariffs are the wrong tool to fix a trade deficit caused by America’s borrowing and consumption habits. Here’s what Trump’s trade war is all about: WHAT’S A TRADE WAR? First up, a trade war isn’t an actual war: It’s a conflict that results when one side feels that a trading relationship is unfair. Let’s say you flood my market with cheap steel, at prices below the cost of production. Companies in my country are going to the wall. They are laying off workers. My voters. That’s dumping and, under the rules of global trade, I can retaliate by imposing tariffs on your steel. For a trade conflict like this to turn into a trade war, things need to escalate. And that’s what is happening here: Trump is still threatening to hit America’s closest trading partners with tariffs on pretty much everything. That means we could be about to embark on the biggest trade war since the 1930s. HOW DO TARIFFS WORK? Trump claims that his new tariffs will make Americans rich — he’s even promised to set up a new External Revenue Service to collect all the revenues that they throw off. He also says foreign companies will pay them and that they won’t hurt U.S. consumers. That’s not how they work, however. Tariffs are a tax that is paid by the importer at the border. If they go up, the importer faces a choice — to pass on the price increase to the consumer, or to accept a squeeze on their profit margins. Price increases from Trump’s across-the-board tariffs would show up immediately in consumer inflation, economists say. And although he has promised to offset their impact with tax cuts elsewhere, there is no sign of that happening yet. As for the potential revenue from tariffs, Trump likes to hark back to the late 19th century, when tariffs accounted for over half of U.S. federal revenues. But that was before income tax — which today supports a government much larger in relation to the overall economy. There is just no way that tariff revenues can pay for a modern state. WHEN WAS THE LAST TRADE WAR? In Trump’s first term. He imposed 25 percent duties on steel and 10 percent on aluminum in 2018 — while the European Union responded by slapping $6 billion in tariffs on Harley Davidson motorbikes, Levi’s jeans and bourbon. Trump threatened to escalate by hitting imports of European cars — but it never came to that. Eventually, the tariffs were suspended by both sides. The EU truce expires at the end of March, meaning that even if Trump doesn’t hit Europe with tariffs now, their trade dispute could still get out of hand. The clearest precedent is likely the so-called Nixon shock of 1971. The starting point was comparable to today: The costs of the Vietnam War and of the Great Society policies of the 1960s had tipped the United States from surplus into deficit. In an attempt to restore the balance, President Richard Nixon abolished the gold standard — forcing the trading partners of the U.S. to revalue their currencies. He ordered a 90-day freeze on wages and prices. And he imposed a 10 percent import tax. Nixon’s actions are considered to have been a political success but an economic failure. The import tax was scrapped within months. And the U.S. economy struggled for years with stagflation — a combination of low growth and high inflation — that was only squeezed out of the system in the 1980s by Federal Reserve Chair Paul Volcker’s tough monetary policies. WHO IS THE REAL ENEMY? China. Although Trump has only threatened to hit China with tariffs of 10 percent, the tariffs still hanging over Canada and Mexico are indirectly aimed at Beijing. That’s because, under the USMCA trade accord (the successor to NAFTA), Chinese companies — e.g. makers of electric vehicles — would normally enjoy duty-free access to the U.S. market if they locate production in North America. In recent years there has been bipartisan consensus in Washington on the need to fight back against China and its economic model, which has created vast industrial overcapacity and has flooded world markets with surplus production. Since taking office, however, Trump has dialed back the rhetoric, saying he just wants a “fair” trading relationship with China. One thing to watch: Will Trump drop the tariffs against America’s allies if they agree to align with the United States in shutting out China? That’s one straw the European Union is clutching at in the hope of keeping the transatlantic peace. HOW FAR CAN THIS ESCALATE? Trump, in his second incarnation as U.S. president, has shown no inhibitions in questioning the territorial integrity of other nations — jibing that Canada should become the 51st U.S. state or staking a claim to Greenland, a protectorate of EU member Denmark. A greater concern is that, in playing fast and loose with international law, Trump is playing into the hands of leaders — like Russia’s Vladimir Putin — who want to overturn the status quo. In a world where multiple fires are burning, Trump is liberally splashing gasoline and tossing matches to start new ones. CAN EUROPE ESCAPE TRUMP’S WRATH? The U.S. president has been amping up his rhetoric, on Sunday night calling the EU an “atrocity.” Brussels is desperate to engage, offering to buy more U.S. liquefied natural gas or weapons as Trump presses European governments to spend more on defense. Last time, Brussels answered Trump’s steel and aluminum tariffs by retaliating against motorbikes, jeans and bourbon — measures targeted to cause maximum pain in Republican strongholds.  The EU could do the same again — or wield its trade “bazooka,” the anti-coercion instrument, which would put retaliation on a stronger legal footing. Experts worry, though, that the anti-coercion instrument may be too slow, because it foresees a period of consultation before action. The EU needs a new, bigger bazooka that can be fired in real time, they argue. CAN TRUMP BE STOPPED? Trump is, for the first time, invoking emergency powers under the 1977 International Emergency Economic Powers Act (IEEPA), so far only used by Joe Biden to impose sanctions against Russia over Putin’s war against Ukraine.  The IEEPA hasn’t yet been used to justify tariffs — and it’s possible that business groups which suffer financial injury as a result will take legal action. It’s unlikely, however, that a judge would issue an immediate injunction against the tariffs. Any litigation would likely be drawn out. The U.S. Congress might also have the power to halt Trump’s trade war. On top of the doubtful justification that fentanyl and illegal immigration represent an economic emergency, the legislature has also delegated broad responsibility for trade policy to the president — it first did so to Franklin D. Roosevelt back in 1934 — and can take it back. But with both the Senate and the House of Representatives under Republican control, a major rift would have to open up on trade to stop him in his tracks. And that looks unlikely right now. Then there’s the World Trade Organization — a global body created 30 years ago to act as an umpire in trade disputes. It’s currently unable to fulfil that role, however, after both Trump and Biden blocked the appointment of judges to its Appellate Body, or highest court of appeal. THE BOTTOM LINE For Trump there are no rules. It’s the law of the jungle out there. So unless there is a strong political or judicial backlash in the United States against his trade war, he will be hard to stop.  Then again, he might just do a deal. This story has been updated.