BRUSSELS — The European Parliament’s leading trade lawmakers on Wednesday postponed a decision on whether to freeze a U.S. trade deal over Donald Trump’s threat to annex Greenland.  MEPs are due to hold a vote on Jan. 26, laying out the European Parliament’s position on lifting tariffs on U.S. industrial goods — one of the key planks of a deal struck between Brussels and Washington last summer. But some MEPs, angry at Trump’s behavior, don’t want the vote to go ahead, thereby freezing the decision on lifting the tariffs.  But at a meeting of lawmakers leading on the topic, they decided to delay taking a decision on whether to postpone or go ahead with the vote, awaiting the outcome of high-stakes meetings between Washington, Nuuk and Copenhagen taking place later Wednesday. “We are not in a position to move the agreement to a vote today,” lead trade lawmaker Karin Karlsbro, of the liberal Renew Europe, told POLITICO, adding that clarity from the U.S. on Greenland was essential.  Discussions will continue next Wednesday, the chair of the international trade committee, Bernd Lange, told POLITICO as he left the room. Political groups are divided over what to do in response to Trump’s threats to annex European territory. The Socialists and Democrats, of which Lange is a member, are leaning toward freezing the vote on the trade agreement. “One camp is more like, OK, let’s cooperate with the U.S. in order to get the maximum out, and there’s the other camp that says, OK we also need to show teeth and not give in on everything,” explained Green lawmaker Anna Cavazzini, who is also the chair of the internal market committee.  Cavazzini, who is in favor of freezing the deal, added that lawmakers agreed to delay the decision to “observe the global situation,” adding that the groups also need to agree on specific clauses in the final Parliament text.  The U.S. deal “will not be postponed,” assured EPP lawmaker Željana Zovko, telling POLITICO on Wednesday that any delay would hurt businesses as it would bring instability to transatlantic relations, while only Russia and China would benefit from it.  Under the deal struck in July, the EU committed itself to legislation lifting tariffs on U.S. industrial goods and lobsters, in exchange for Washington reducing tariffs on European cars. The deal is seen as lopsided in favor of Washington across party lines, but lawmakers were willing to put up with it in exchange for having Trump commit to protecting European security. As Greenland annexation threats continue, some no longer see the point of the deal. While the U.S. has upheld its end of the bargain on the car tariffs; the EU, so far, has not, because its institutions must still approve their positions on the Commission’s proposal. The lengthy process has already tested Washington’s patience, with Trade Representative Jamieson Greer telling POLITICO in December that the U.S. wouldn’t grant further tariff exemptions unless the EU keeps its end of the bargain. After the Council of the EU agreed on its position in late November, pressure is rising on the European Parliament to vote on its own stance.

Europe’s chemical industry has reached a breaking point. The warning lights are no longer blinking — they are blazing. Unless Europe changes course immediately, we risk watching an entire industrial backbone, with the countless jobs it supports, slowly hollow out before our eyes. Consider the energy situation: this year European gas prices have stood at 2.9 times higher than in the United States. What began as a temporary shock is now a structural disadvantage. High energy costs are becoming Europe’s new normal, with no sign of relief. This is not sustainable for an energy-intensive sector that competes globally every day. Without effective infrastructure and targeted energy-cost relief — including direct support, tax credits and compensation for indirect costs from the EU Emissions Trading System (ETS) — we are effectively asking European companies and their workers to compete with their hands tied behind their backs. > Unless Europe changes course immediately, we risk watching an entire > industrial backbone, with the countless jobs it supports, slowly hollow out > before our eyes. The impact is already visible. This year, EU27 chemical production fell by a further 2.5 percent, and the sector is now operating 9.5 percent below pre-crisis capacity. These are not just numbers, they are factories scaling down, investments postponed and skilled workers leaving sites. This is what industrial decline looks like in real time. We are losing track of the number of closures and job losses across Europe, and this is accelerating at an alarming pace. And the world is not standing still. In the first eight months of 2025, EU27 chemicals exports dropped by €3.5 billion, while imports rose by €3.2 billion. The volume trends mirror this: exports are down, imports are up. Our trade surplus shrank to €25 billion, losing €6.6 billion in just one year. Meanwhile, global distortions are intensifying. Imports, especially from China, continue to increase, and new tariff policies from the United States are likely to divert even more products toward Europe, while making EU exports less competitive. Yet again, in 2025, most EU trade defense cases involved chemical products. In this challenging environment, EU trade policy needs to step up: we need fast, decisive action against unfair practices to protect European production against international trade distortions. And we need more free trade agreements to access growth market and secure input materials. “Open but not naïve” must become more than a slogan. It must shape policy. > Our producers comply with the strictest safety and environmental standards in > the world. Yet resource-constrained authorities cannot ensure that imported > products meet those same standards. Europe is also struggling to enforce its own rules at the borders and online. Our producers comply with the strictest safety and environmental standards in the world. Yet resource-constrained authorities cannot ensure that imported products meet those same standards. This weak enforcement undermines competitiveness and safety, while allowing products that would fail EU scrutiny to enter the single market unchecked. If Europe wants global leadership on climate, biodiversity and international chemicals management, credibility starts at home. Regulatory uncertainty adds to the pressure. The Chemical Industry Action Plan recognizes what industry has long stressed: clarity, coherence and predictability are essential for investment. Clear, harmonized rules are not a luxury — they are prerequisites for maintaining any industrial presence in Europe. This is where REACH must be seen for what it is: the world’s most comprehensive piece of legislation governing chemicals. Yet the real issues lie in implementation. We therefore call on policymakers to focus on smarter, more efficient implementation without reopening the legal text. Industry is facing too many headwinds already. Simplification can be achieved without weakening standards, but this requires a clear political choice. We call on European policymakers to restore the investment and profitability of our industry for Europe. Only then will the transition to climate neutrality, circularity, and safe and sustainable chemicals be possible, while keeping our industrial base in Europe. > Our industry is an enabler of the transition to a climate-neutral and circular > future, but we need support for technologies that will define that future. In this context, the ETS must urgently evolve. With enabling conditions still missing, like a market for low-carbon products, energy and carbon infrastructures, access to cost-competitive low-carbon energy sources, ETS costs risk incentivizing closures rather than investment in decarbonization. This may reduce emissions inside the EU, but it does not decarbonize European consumption because production shifts abroad. This is what is known as carbon leakage, and this is not how EU climate policy intends to reach climate neutrality. The system needs urgent repair to avoid serious consequences for Europe’s industrial fabric and strategic autonomy, with no climate benefit. These shortcomings must be addressed well before 2030, including a way to neutralize ETS costs while industry works toward decarbonization. Our industry is an enabler of the transition to a climate-neutral and circular future, but we need support for technologies that will define that future. Europe must ensure that chemical recycling, carbon capture and utilization, and bio-based feedstocks are not only invented here, but also fully scaled here. Complex permitting, fragmented rules and insufficient funding are slowing us down while other regions race ahead. Decarbonization cannot be built on imported technology — it must be built on a strong EU industrial presence. Critically, we must stimulate markets for sustainable products that come with an unavoidable ‘green premium’. If Europe wants low-carbon and circular materials, then fiscal, financial and regulatory policy recipes must support their uptake — with minimum recycled or bio-based content, new value chain mobilizing schemes and the right dose of ‘European preference’. If we create these markets but fail to ensure that European producers capture a fair share, we will simply create new opportunities for imports rather than European jobs. > If Europe wants a strong, innovative resilient chemical industry in 2030 and > beyond, the decisions must be made today. The window is closing fast. The Critical Chemicals Alliance offers a path forward. Its primary goal will be to tackle key issues facing the chemical sector, such as risks of closures and trade challenges, and to support modernization and investments in critical productions. It will ultimately enable the chemical industry to remain resilient in the face of geopolitical threats, reinforcing Europe’s strategic autonomy. But let us be honest: time is no longer on our side. Europe’s chemical industry is the foundation of countless supply chains — from clean energy to semiconductors, from health to mobility. If we allow this foundation to erode, every other strategic ambition becomes more fragile. If you weren’t already alarmed — you should be. This is a wake-up call. Not for tomorrow, for now. Energy support, enforceable rules, smart regulation, strategic trade policies and demand-driven sustainability are not optional. They are the conditions for survival. If Europe wants a strong, innovative resilient chemical industry in 2030 and beyond, the decisions must be made today. The window is closing fast. -------------------------------------------------------------------------------- Disclaimer POLITICAL ADVERTISEMENT * The sponsor is CEFIC- The European Chemical Industry Council  * The ultimate controlling entity is CEFIC- The European Chemical Industry Council  More information here.

Brussels and Beijing got 99 problems — but an upcoming high-level summit ain’t gonna solve a single one. When EU leaders Ursula von der Leyen and António Costa travel to China in two weeks, they will have several concerns in their travel bags — from market access to China’s chokehold over strategic raw materials. America’s lurch into protectionism under President Donald Trump is disturbing trade flows, meanwhile, making it harder to resolve those thorny issues. Von der Leyen reeled off a litany of political and economic complaints on Tuesday — from China’s state-subsidized overproduction to price gouging, “systematic” discrimination against foreign companies, export restrictions and more — setting the tone for a contentious summit.  “China has an entirely different system,” she said in an address to European lawmakers. The country has “unique instruments at its disposal to play outside the rules,” allowing it “to flood global markets with subsidized overcapacity — not just to boost its own industries, but to choke international competition.” And the pain points are multiplying: The latest is a move by Beijing to restrict government purchases of EU medical devices, in retaliation for a similar ban on Chinese medical equipment imposed by Brussels last month. Those come on top of a lingering dispute over the EU’s imposition of duties on Chinese-made electric vehicles last year and retaliatory duties slapped by Beijing on European liquor. Despite the milestone it’s supposed to celebrate — the 50th anniversary of EU-China diplomatic ties — the summit is shaping up to be more symbolic than substantive. With both sides entangled in trade spats, expectations are at a new low. Officials are bracing for a summit that’s going to be more about saving face than achieving concrete results. While Brussels and Beijing usually alternate as summit hosts, Chinese President Xi Jinping snubbed EU leaders earlier this year by declining an invitation to come to Brussels. The summit — originally planned to run for two days — will now only take place on July 24 in Beijing. It’s still unlikely that Xi will attend the gathering, which will be chaired by Premier Li Qiang, China’s second-ranked leader. Xi might yet meet bilaterally with von der Leyen and Costa, but that is TBC. “Not only doesn’t he [Xi] show up in Brussels, he doesn’t even attend in Beijing … it’s so embarrassing, I would not take it over my dead body, I swear,” said Alicia García-Herrero, chief economist for Asia-Pacific at French investment bank Natixis and a senior fellow at Bruegel, a think tank. “As a European I would say: Do not go, do not accept this shit.” MOOD SHIFT What’s more, the EU and the U.S. are scrambling to seal a provisional trade deal ahead of Trump’s (newly postponed) deadline to reimpose sweeping tariffs on Aug. 1. Should that happen before the EU-China summit, it’s bound to spell further trouble for the meeting. “If the EU and the U.S. are going to seal a similar deal to [the deal the U.S. sealed with the U.K.], other trading partners will be put at a disadvantage and China will retaliate,” said a person from the Chinese business sector who was granted anonymity to speak candidly. In an attempt to find common ground with Trump, von der Leyen has hardened her tone toward Beijing, accusing China at a G7 summit in Canada last month of “weaponizing” its leading position in producing and refining critical raw materials.  Unsurprisingly, those comments didn’t land well. Guo Jiakun, spokesperson for China’s Ministry of Foreign Affairs, hit back at von der Leyen’s remarks on raw materials. Beijing “fully considered the reasonable needs and concerns of various countries, and reviewed export license applications in accordance with laws and regulations,” Guo said. Von der Leyen’s remarks were “quite hawkish and unsettling,” said the person from the Chinese business sector quoted above. “If [von der Leyen] was trying to charm Trump, she may have done so at the cost of credibility — reminding China that the EU can talk cooperation with China one day and posture like a Cold Warrior the next,” they added. In short: The mood is sour — at a time when neither side, and especially the EU, can afford it. In a sign of its concerns over trade imbalances with China, Brussels launched a tool in April to monitor the diversion of trade flows toward the bloc after Trump imposed tariffs of up to 145 percent on Chinese goods (later lowered to 30 percent). While it’s too early to identify a clear trend, Chinese exports to Europe are sharply up in sectors including chemicals, textiles and machinery. HUGE UNCERTAINTY When the summit was announced — days before Trump’s inauguration in January — the EU struck an amicable tone, broadcasting its willingness to rekindle its relationship with China amid uneasy transatlantic relations. Nearly six months on, however, there has been scant progress toward resolving bilateral disputes. And the Chinese commerce ministry has warned “any country” against sealing trade deals with the U.S. that “undermine Chinese interests.” “The situation is not good. The European Union has 70 percent of its exports to the United States aimed at new tariffs. We are facing trade diversion because of some of the actions being taken, and there’s a huge uncertainty in the trade world,” Maria Martin-Prat De Abreu, a senior official at the Commission’s trade department who is in charge of the EU’s China policy, told an event last month. On top of rifts over electric vehicles, medical devices, spirits and pork, China has imposed — as part of its retaliation against Washington — additional controls on exports of rare earths. Those are inevitably hitting EU countries as well. Although EU trade chief Maroš Šefčovič has managed to negotiate faster permitting procedures for European companies, industry continues to sound the alarm over threats to supply chains for the manufacture of everything from smartphones to car engines. China provides almost 99 percent of the EU’s supply of the 17 rare earths. In a reflection of the frosty relations between Brussels and Beijing, the two sides don’t plan to issue a joint statement summing up their mutual commitments, departing from the usual practice in international diplomacy. The EU and China are instead looking at publishing a mere press release, two EU officials said, just like they did in 2023. “There’s a huge amount of work that needs to be done between now and the summit,” said Martin-Prat De Abreu, adding that Brussels and Beijing were focusing on both “general, structural issues” and more specific issues such as market access for agricultural goods and cosmetics. “It is very difficult,” she added. What’s more, the usual high-level trade dialogue that typically precedes the summit won’t be held due to the lack of progress on trade issues, according to a person from the Chinese business sector and a European official. And Brussels is refusing to sign a joint declaration on climate action unless China pledges greater efforts to slash its greenhouse gas emissions, Climate Commissioner Wopke Hoekstra told the Financial Times. “It’s not that we shut the door,” a third EU official said. “It’s more that we never opened it. We’re sending a signal to both China and the United States.” This story has been updated.

Listen on * Spotify * Apple Music * Amazon Music What do Marine Le Pen, Yanis Varoufakis and Donald Trump have in common? More than you’d think. In this episode of EU Confidential, host Sarah Wheaton breaks down the court decision that could end Le Pen’s political career as well as the fallout for France’s far right. With POLITICO’s Clea Caulcutt giving us the latest from Paris, Yanis Varoufakis — the former Greek finance minister and leader of left-wing party Mera25 — joins to discuss his controversial defense of Le Pen, and why he believes Europe’s political future is on the line. His stance got us thinking about the horseshoe theory of politics: Are the far left and far right really that different?

PARIS — French President Emmanuel Macron wants EU businesses to stop investing in America in response to U.S. President Donald Trump’s massive tariffs. “It is important that future investments, the investments announced over the last few weeks, should be put on hold for some time until we have clarified things with the United States of America,” Macron said on Thursday as he hosted a meeting with representatives of the sectors impacted and the government at the Elysée palace. “What message would we send by having major European players investing billions of euros in the American economy at a time when [the U.S.] are hitting us?” Macron continued, calling for “collective solidarity.” Macron’s comments are seen as an attempt to dissuade French tycoons from cozying up to Trump, potentially to try to cut private deals, outside regular EU trade policy. Earlier this month Trump announced that French shipping giant CMA CGM intended to invest €20 billion in the U.S. In January, meanwhile, Bernard Arnault, the head of luxury goods giant LVMH, said he was considering increasing investment in the U.S. and lauded Trump’s economic policy. On Wednesday the Trump administration slapped the EU with 20 percent tariffs on all exports to the U.S. in what Macron called “a brutal and unfounded decision.” The French president said Trump’s tariffs confirmed that France had been right to push for a tougher trade policy and stronger trade defense instruments. “We need to continue to accelerate at the European level with an agenda of trade protection,” Macron said, citing EU duties on Chinese vehicles as an example of how the EU can up the pressure on its economic rivals. “We are not naïve, we are going to protect ourselves,” Macron said, referring to the trade war with the U.S. On top of retaliatory tariffs, Macron said, Brussels should consider using the EU’s so-called anti-coercion instrument against the U.S. — a new tool in the bloc’s trade arsenal that was conceived to hit countries like China — and also take measures hitting American Big Tech. “Nothing is ruled out, all tools are on the table,” Macron said.

PARIS — Strategic autonomy is all well and good. But what happens when your adversaries go after the bubbly? French President Emmanuel Macron’s push for a stronger, more united Europe better equipped to deter Russia’s war machine and retaliate to trade threats from the United States and China is facing a major test as Beijing and Washington target France’s famous alcohol products. China has for months been mulling duties on European brandies, including cognac, a move widely seen as retaliation for Paris’ vehement support for EU tariffs on Chinese electric vehicles. U.S. President Donald Trump upped the ante last week by threatening 200 percent tariffs on European alcohol. Such a move would disproportionally affect winemaking countries including France, which exported €15.4 billion worth of wine and spirits last year, according to the Federation of French Wine and Spirits Exporters (FEVS), most of which went to the United States. France is the EU’s top exporter of wine and spirits, and the sector is particular influential in French politics and society. With one of its most valuable exports now in the White House’s crosshairs, French leaders appear to be getting cold feet on the whole unity thing. Prime Minster François Bayrou and his government are instead publicly urging Brussels to spare Kentucky bourbon from any possible European response. After Trump imposed global steel and aluminum tariffs last week, the European Union threatened to retaliate by hitting a list of iconic American exports in return — including Kentucky bourbon. Bayrou said over the weekend putting bourbon on the list was a mistake and France is now pushing to reconsider what is on its retaliatory list. “We asked them [the European Commission] 50 times not to hit bourbon,” said a French minister who was granted anonymity to speak freely about sensitive negotiations. SIGN OF WEAKNESS Jean-Luc Demarty, who was in charge of drafting the European Commission’s tariff retaliation list in 2018, during Trump’s first term, said it was “a mistake” to publicly try to dial back on Brussels’ strategy, as it will be seen in Washington as “a sign of weakness.” “Knowing Trump, there is no chance that he will backtrack, he is going to massacre us,” Demarty said. While comments like Bayrou’s might reassure French winemakers, it also shows how Trump’s efforts to divide EU countries are already yielding results. “The French comments on bourbon suggest that its previous approach — favoring a more aggressive and united EU trade policy — is now crumbling under the pressure of the playground bully targeting French wine and spirits exports to the U.S.,” said John Clarke, until recently the EU’s top agricultural trade negotiator. France has previously been unafraid to play the role of EU trade policy bad cop, vocally defending the bloc’s tariffs in the face of criticism from its more pro-free trade partners like Germany. But the Bayrou government is under pressure from the country’s wine and spirits sector, which is heavily reliant on exports and has already been a collateral victim of previous trade disputes with Trump. “Stop making French wines and spirits the collateral victims of disputes with the United States,” the FEVS said in a statement. But as France tries to shield its alcohol sector from the transatlantic trade war, it risks encouraging countries to do what they can to protect their own valuable exports. And this might just a bitter foretaste of how EU countries will react on April 2, when Trump will announce a new round of wide-ranging so-called “reciprocal tariffs.”  If those measures target German cars, as he has threatened, it would deal a huge blow to an industry that powers Europe’s largest economy but is already facing headwinds. “We haven’t seen anything yet,” said Demarty. “On April 2, we are going to see hell.” 

France on Thursday criticized the European Commission’s plans to save Europe’s dying industrial sector as unsatisfactory even if they serve as a good starting point. “We need a confidence boost, not homeopathic remedies, to reassure manufacturers and convince them to invest and hire,” French Industry and Energy Minister Marc Ferracci told French daily Les Echos. Ferraci’s comments were published fewer than 24 hours after Commission President Ursula von der Leyen unveiled the European Union’s Clean Industrial Deal, which will put €100 billion toward short-term relief to supercharge climate-friendly manufacturing in the bloc, and an omnibus package that pares back corporate green rules criticized by industry and member countries like France as excessive red tape. Fabrice Le Saché, the vice president of France’s major business lobby Medef, said the signal Brussels sent was not strong enough. “We were expecting more, in a stronger way, faster,” he said, noting that the €100 billion investment is a lot less than what former European Central Bank chief Mario Draghi had recommended. France has for years called for these types of measures. While the French government has said it believes Brussels is going in the right direction, praising new “Buy European” rules and support for nuclear energy, it also said the Commission needs to pick up speed. Ferracci even threatened to ignore the EU’s emission-reduction target (a 90 percent cut by 2040) if the Commission doesn’t come up with a more ambitious plan. “We want to go faster, we want to deliver faster,” said a French industry ministry official, who was granted anonymity to speak candidly about the Clean Industrial Deal. Paris is particularly concerned about Brussels moving too slowly to save Europe’s imperiled steel sector, which has warned that firms will face irreversible decline without help this year. The industry is already reeling after U.S. President Donald Trump promised 25 percent tariffs on steel imports, which could divert Asian excess production to the European market. Ferracci met in person Thursday with Italian and Spanish counterparts in person and several others remotely to discuss the issue. In a joint declaration published later on Thursday, those three countries plus Belgium, Luxembourg, Romania and Slovakia said they would push to reform the EU’s carbon border levy (CBAM) “as soon as possible” to protect the bloc’s struggling steel industry against Asian rivals. Paris in particular wants to widen the scope of the carbon border levy to also include finished products and not just materials such as steel, iron and cement, as is now the case. Brussels had proposed to delay the entry into force of several CBAM measures by one year as part of the omnibus simplification package — a decision the French industry minister quoted above called “disappointing.” The seven countries also want the Commission to increasingly use its trade defense arsenal to protect the local industry against massive imports of Asian steel. Europe already has in place import quotas for steel to protect its local industry, but Ferracci told reporters that those are “too low” after his Thursday meeting. “There is too much steel, especially coming from China and massively subsidized, entering Europe,” he said. Von der Leyen will push forward with the issue at a March 4 strategic dialogue meeting with the steel industry.

BRUSSELS — The European Commission fired a warning shot against the United States on Friday, vowing to react “immediately” if President Donald Trump implements tariffs that match those of America’s trade partners. After reinstating this week duties on steel and aluminum, Trump signed a memo Thursday that sets out a process for imposing so-called “reciprocal” tariffs. These would effectively raise tariffs on a country’s exports to the U.S., based on the level of tariffs or non-tariff barriers that country imposes on U.S. goods. “The EU will react firmly and immediately against unjustified barriers to free and fair trade, including when tariffs are used to challenge legal and non-discriminatory policies,” the European Commission said in a statement. Trump’s team has taken particular exception to value-added taxes levied on sales of all goods by European countries — complaining that these add around 20 percent to the 10 percent duty the EU charges on auto imports. The U.S. has 2.5 percent tariffs and no federal sales tax. The statement comes after a week of tit-for-tat rhetoric between Washington and Brussels, and warnings from Brussels that Trump’s moves will not go unanswered. Since the trade skirmishes of Trump’s first term, the EU has expanded its trade defense arsenal in a way that would enable it to strike back against measures it views as unlawful. Brussels also recalled its attachment to rules-based trade, accusing Washington of undermining its existing commitments. The U.S. has effectively hamstrung the World Trade Organization, having blocked the appointment of judges to its highest appeals court since Trump’ s first term. “For decades, the EU has worked with trading partners like the U.S. to reduce tariffs and other trade barriers worldwide, reinforcing this openness through binding commitments in the rules-based trading system — commitments that the US is now undermining,” the Commission said.

BRUSSELS — German Chancellor Olaf Scholz says the European Union would be ready to retaliate if Donald Trump imposes tariffs “within an hour.” Not so fast.  The U.S. president this week reinstated duties on steel and aluminum that he hit the world with in his first term — and on Thursday announced he would impose “reciprocal” tariffs that could inflict huge harm on the European auto industry.  The European Commission, which represents the bloc’s 27 countries on trade, responded by seeking dialogue.  Yet should negotiations fail, the bloc claims to be far better prepared than last time around. Its strategy: an iron fist in a velvet glove. “Especially with a personality like Trump, if we don’t react, he’ll trample us,” says Jean-Luc Demarty, who headed the Commission’s trade department during Trump’s first term. “We have all the instruments and we must react effectively on principle. ” Commission President Ursula von der Leyen has vowed a “firm and proportionate” response to the 25 percent U.S. steel and aluminum tariffs. Calling them unlawful, she said that Trump’s protectionist policies “will not go unanswered.”  But she also extended an olive branch when she met Vice President JD Vance on Tuesday in Paris, in the first high-level meeting between the two administrations. She called for cooperation in tackling a Chinese steel glut, describing it as a “critical” challenge for the two historic allies. EU trade chief Maroš Šefčovič also urged constructive dialogue in a call on Wednesday with Trump’s designated Commerce Secretary Howard Lutnick and nominee for Trade Representative Jamieson Greer. He won strong support for the Commission’s approach from EU trade ministers at an emergency video call directly after. For now, at least. It’s a balancing act for von der Leyen and Šefčovič as Trump sees red over America’s transatlantic trade deficit. The EU is a net exporter of autos, pharmaceuticals and food to the U.S. But it’s also a big importer of services — and that makes Big Tech a potential target for European retaliation.  NO MORE PLAYING DEFENSE After the shock of Trump’s first mandate, and nudged by France, the EU has strengthened its trade defense arsenal — first by revamping its Enforcement Regulation, which enables the EU to respond if breaches by partners in trade agreements harm its commercial interests. “Those who say the EU is ill-prepared are wrong: During the past term we have prepared ourselves exactly for a scenario that is unfolding at the moment. Because we have expanded our toolbox, we can now better defend our interests,” said Bernd Lange, a senior lawmaker who chairs the European  Parliament’s trade committee. Its first line of retaliation could be symbolic — reinstating the €2.8 billion in tariffs it imposed in response to Trump’s steel and aluminum tariffs back in 2018, including on Harley-Davidson motorcycles, Levi jeans and cranberry juice.  But Brussels knows symbolism alone won’t be enough to deter Trump. “What we did in 2018 was targeting products that don’t hurt us, but hurt them,” said Demarty, who also worked as economic adviser to Jean-Claude Juncker, the Commission president at the time.  “Politically symbolic products: Harley-Davidson, bourbon whiskey, corn. I was the one who personally added these products back then. My troops were totally tetanized at the idea of adding such sensitive products,” he added.  Another possible leverage is the EU’s regulatory arsenal, especially the bloc’s grip on Big Tech. It’s an area where Washington has skin in the game, with Elon Musk’s X or Mark Zuckerberg’s Meta in the EU’s crosshairs over the tech giants’ content regulation and sharing of data with authorities. As the world’s largest exporter of services, the U.S. could be a prime target for EU retaliation. Here, Brussels could add restrictions on American consulting and financial firms, revoking intellectual property rights, further restricting data flows, or increasing digital taxes on U.S.-based platforms.  THE LONG GAME  It was with a Trump 2.0 scenario in mind that the European Commission devised a way to hit back if one of its member states were subjected to economic blackmail, its Anti-Coercion Instrument.  “We now see in this Trump administration that coercion may become a standard form of behavior in U.S. trade policy,” said Ignacio García Bercero, who was the Commission’s point person on U.S. trade during Trump’s first term from 2017 to 2021. EU trade chief Maroš Šefčovič also urged constructive dialogue in a call on Wednesday with Trump’s designated Commerce Secretary Howard Lutnick and nominee for Trade Representative Jamieson Greer. | Nicolas Tucat/AFP via Getty Images While the tool was designed to put the Commission in the lead, EU countries sought to ensure they would still get to call the shots in determining whether Washington or Beijing crossed the line, and how any injury should be repaired.  A textbook scenario to deploy the tool might be if Trump — with his eye on annexing Greenland — imposes tariffs in a bid to pressure Denmark into surrendering control over the strategic Arctic island. Although it would first have to negotiate with Washington, the EU could then pull the trigger on its trade “bazooka,” with a process that could lead in as little as six months to increasing customs duties on specific goods, imposing quotas or excluding U.S. companies from public contracts in the EU.  But that all depends on national capitals — where a qualified majority of 15 out of the EU’s 27 member countries would be needed to back the Commission’s proposed course of action.  Should that not happen, “there is a fundamental problem with the way the European Union is working,” García Bercero concluded. Put another way, the EU may have equipped itself to fight the last trade war — rather than the next one.  For that, argues David Kleimann of the ODI think tank, it needs to create the legal basis for a new tool to respond in real time to a systemic trade threat — like the universal tariffs that Trump threatened on the campaign trail. “This gap can be temporarily addressed through ad-hoc stand-alone legislation once the need arises,” writes Kleimann. “But the time is now for the institutions to consider adding a more robust instrument of general application to its armoury to equip the Union for the coming era of trade wars.” This story has been updated.

Countries around the world are nervously waiting to see if — and how — Donald Trump follows through on his drastic tariff threats after he’s sworn in as U.S. president on Monday.  If Trump does all he’s said he’ll do, he could saddle U.S. firms with an estimated $640 billion in import costs and drive up domestic inflation, as his promised 60 percent tariffs on goods from China, 25 percent on Canada and Mexico, and universal flat tariffs of up to 20 percent on other nations bite. Unlike in 2017, when many governments were blindsided by Trump’s aggressive trade actions, leaders in Ottawa, Brussels and Beijing have been hunkering down and wargaming how to fend off the economic shockwave that the heavy duties on U.S. rivals and allies alike would send rippling around the globe. They’re also drawing up plans to retaliate or give Trump a sweetheart deal to make them go away. -------------------------------------------------------------------------------- CANADA MEXICO CHINA EU U.K. LATIN AMERICA MITIGATION OPTIONS -------------------------------------------------------------------------------- NORTH AMERICA CANADA — Sue Allan TRUMP’S THREATS Trump has vowed that slapping Canada with 25 percent tariffs will be a first-day priority. “As one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” he announced on Truth Social in November.  THE RETALIATION PLAYBOOK The threats have consumed Ottawa, which is saying a lot in a town turned upside down by news that Prime Minister Justin Trudeau is ready to resign as soon as his Liberal Party can find his replacement.  Despite his self-inflicted lame-duck status, Trudeau is using time on U.S. networks to warn Canada’s neighbors that their pocketbooks are at risk of becoming collateral damage in Trump’s trade war. “Anything an American president does to hurt the Canadian economy will also hurt American consumers and American workers and American growth,” he told CNN’s Jake Tapper. Ottawa has a set of retaliatory measures set to drop on Monday if Trump takes action. There is talk of Canada leveraging energy exports in its retaliatory response. “Everything is on the table,” the prime minister said after gathering with his provincial counterparts in Ottawa. The prime minister likes to point out that Canada is the top export partner to about 35 states. “Anything that thickens the border between us ends up costing American citizens and American jobs,” he said earlier this month. At the outset of 2024, Trudeau enlisted Canada’s U.S. ambassador and top ministers to travel across the U.S. meeting with lawmakers, governors and business leaders in a bid to “Trump-proof” the bilateral relationship. They tracked their outreach on spreadsheets — West Virginia, South Carolina, Texas, Arizona and beyond — and insisted they were ready for battle.  HOW WILL IT PLAY OUT?  Trudeau insists that Trump is using threats to annex Canada to distract from any conversation about his tariffs. Canada’s provincial leaders have also rallied in response to Trump — though admittedly not always together. Ontario Premier Doug Ford showed up on Fox News to announce that Canada is not for sale. Alberta Premier Danielle Smith recently found her way to Mar-a-Lago where she says she had a constructive conversation with Trump. “I emphasized the mutual importance of the U.S.-Canadian energy relationship, and specifically, how hundreds of thousands of American jobs are supported by energy exports from Alberta,” she said in a statement. Smith does not want Alberta oil and gas included in Canada’s retaliation measures. All of Canada’s provincial leaders are expected to descend on Washington on Feb. 12 for a full-court press. back to Top MEXICO — Ari Hawkins and Doug Palmer TRUMP’S THREATS Donald Trump has focused his tariff threats in particular on Mexico and threatened to impose a 25 percent tariff on the country as well as Canada if the United States’ two North American neighbors fail to crack down on irregular migration and the flow of fentanyl from their countries.  Trump has also complained repeatedly about auto imports, accusing Mexico of being a back door for China, and floated 200 percent tariffs or higher on vehicles from south of the border. THE RETALIATION PLAYBOOK Newly-elected Mexican President Claudia Sheinbaum has sharply pushed back on the president-elect’s threats and vowed to retaliate in a letter she sent to Trump in November, which underscored the potential economic consequences for both countries.  “For every tariff, there will be a response in kind,” Sheinbaum wrote. Mexican officials are eyeing the agricultural sector for potential retaliation — and are planning a range of responses based on whether or not the Trump administration follows through on his most aggressive proposals.  Mexican officials tell POLITICO that, despite the back-and-forth, they are cautiously optimistic that Sheinbaum’s defiant response to Trump’s threats could garner his respect, and help facilitate the type of (at times) warm relationship Trump shared with former President Andrés Manuel López Obrador. But the Mexican government has more recently tried to present itself as committed to combating illegal drug trafficking and has implemented crackdowns after Trump’s threat. It also says it has taken steps to curb irregular migration and wants to work with the United States to diversify supply chains in both countries out of China.  HOW WILL IT PLAY OUT?  Sheinbaum has spoken to Trump at least twice since the election to stress the value of collaboration on trade concerns.  Economy Minister Marcelo Ebrard has expressed confidence that Mexico will find a solution that persuades Trump not to follow through on his threat. Ebrard noted that Trump threatened similar tariffs during his first term but did not impose them after announcing that Mexico had taken sufficient action to address his concerns. The U.S. trade deficit with Mexico has skyrocketed in recent years, underscoring the economic risks to both countries from a trade war. Trade data released in February will most likely show it reached a record level of around $170 billion, despite Trump negotiating a new trade agreement during his first term to replace the decades-old North American Free Trade Agreement. It has also, however, drawn the scrutiny of U.S. politicians, particularly Trump, who believes trade deficits are a sign of economic weakness. And it will raise the pressure on Mexico in the upcoming year six review of the U.S.-Mexico-Canada Agreement to agree to a number of new U.S. demands. Those could include new limits on Chinese investment in Mexico, particularly in key sectors like autos.  back to Top CHINA — Phelim Kine TRUMP’S THREATS Trump has repeatedly floated a tariff of 60 percent — and possibly even higher — on all Chinese goods imported into the United States, telling Fox News host Maria Bartiromo last year, “I’m not looking to hurt China. I want to get along with China, but they’ve really taken advantage of our country.” The president-elect also said in an October interview with the Wall Street Journal that if China invaded Taiwan, “I’m going to tax you at 150 percent to 200 percent.”  And in a post-election post on Truth Social, he warned he would raise tariffs on Chinese imports by 10 percent until Beijing stopped the flow of Chinese-produced fentanyl into the U.S.  Trump’s campaign platform, meanwhile, states he would revoke China’s “most favored nation” trade status — a move that would open the door to tariffs of up to 100 percent. THE RETALIATION PLAYBOOK Unlike with Mexico and Canada, there has been far less public trade diplomacy between Trump and Chinese leaders, although the president-elect had a “very good call” with President Xi Jinping on Friday, he said in a post on Truth Social, that included talk of “balancing trade, fentanyl and TikTok and many other subjects.” The Chinese government has been cagey about how it will respond if Trump follows through on his steep tariff threats. China “will firmly safeguard its sovereignty, security and development interests,” if Trump violates international trade rules, Chinese embassy spokesperson Liu Pengyu told POLITICO last week.  That may mean a replay of China’s response to tariffs that the first Trump administration imposed on Chinese imports in 2018 — a round of retaliatory tariffs targeting the U.S. agricultural sector that cost it $10 billion in lost export revenue. That ultimately prompted negotiations which led to the 2020 signing of the U.S. China Phase One trade deal, which Trump then hailed “a momentous step … toward a future of fair and reciprocal trade.” Beijing has, however, failed to deliver on key commitments, including buying U.S. goods and services, regulatory changes to speed imports of genetically modified agricultural products, and patent approval for U.S. pharmaceutical products. HOW WILL IT PLAY OUT?  Beijing’s response may hinge on the degree to which it feels “singled out” for trade punishment, said Greta Peich, the former general counsel of the Office of the United States Trade Representative. “China is less likely to be aggressive if [Trump’s] trade action is impacting all trade,” Peisch added. Beijing likely wants to avoid an escalatory trade war as it tries to maximize exports to stimulate its sputtering economy.  That may tempt Beijing to respond by “impeding the Chinese operations of some U.S. companies,” rather than tit-for-tat tariffs, said Peter Harrell, former senior director for international economics in the Biden administration.   Beijing may even try to stop a new trade war before it starts by “preemptively making an offer to Trump of a deal to avoid new tariffs … or putting a trade offer on the table early to try to head off an escalation,” Harrell added.  back to Top EUROPE EUROPEAN UNION — Camille Gijs TRUMP’S THREATS Trump has vented his fury at the European Union for not buying enough American autos or farm produce and is said to be “obsessed” by the number of German cars on the streets of Manhattan. But, since his Nov. 5 election triumph, he hasn’t directly threatened anything beyond universal tariffs. What he has done is stake a stunning claim to Greenland, coveting the Danish protectorate’s mineral riches and seeking to project power northward as the melting Arctic ice opens up new trade routes. THE RETALIATION PLAYBOOK Trade tensions between Washington and Brussels run deep, with the two sides unable to take advantage of friendlier ties under Joe Biden to resolve a festering dispute over U.S. steel and aluminum tariffs. A truce on the EU’s own retaliatory tariffs will lapse at the end of March — and Brussels hopes that will force Trump back to the negotiating table.  Ursula von der Leyen, the president of the EU executive, has already proposed buying more U.S. liquefied natural gas to even out the trade balance. But, in case things get nasty, the EU can resort to its growing arsenal of trade defense tools. Aside from classic subsidy and dumping investigations, its anti-coercion instrument — developed in response to a first-term trade fight with Trump — empowers the bloc to impose export controls or duties. This trade “bazooka” could be used in response to any threat by Trump to trigger tariffs if, for instance, the EU declines to join the U.S. in putting up trade barriers against China. Another option is for the EU to impose similar tariffs to the ones imposed by Trump on goods it doesn’t depend on, such as Harley-Davidson motorbikes, Jack Daniel’s bourbon or Levi’s jeans. “Let’s not be naive,” former European Commission official Ignacio García Bercero told POLITICO. “Because if the negotiations fail and if the United States feels that we don’t have a credible retaliation option, then we are not going to go anywhere.” In the meantime, the EU is pushing to diversify its trading relationships, overhauling its existing accord with Mexico on Friday to expand opportunities in services, strengthen supply chains and bolster investment protections. That follows a long-awaited trade accord with the Mercosur bloc of South American nations sealed in December.  HOW WILL IT PLAY OUT?  The EU’s biggest countries — Germany, France, Italy and Ireland — might be at greater risk of incurring Trump’s wrath as they have wide trade surpluses with the United States.  Never a fan of Brussels, Trump is expected to prefer dealing with countries bilaterally, and that could put fragile EU unity to the test. Recent visits by Italy’s Giorgia Meloni and Hungary’s Viktor Orban to Mar-a-Lago show that several countries are already trying to  curry favor with Trump directly — and dodge his tariff onslaught. Brussels finds itself in a dilemma over whether to align with Washington and resist China’s $1 trillion export overhang. If it does, its approach would diverge from that of the U.S., according to García Bercero, now at the Bruegel think tank: “If there’s a willingness to align more closely on how to deal with Chinese overcapacity, each side will be doing it its own way. In the EU, we will mostly focus on trade defense, including more safeguards.” back to Top UK — Graham Lanktree and Sophie Inge TRUMP’S THREATS Trump hasn’t threatened the U.K. specifically like he has China, Canada and Mexico. Still, an economic hit to those nations would be felt in London, with tariffs on Beijing contributing to a shift in supply chains forecast to slow U.K. trade with its sixth largest economic partner long-term.  THE RETALIATION PLAYBOOK Whitehall officials are desperate to avoid getting in the middle of an escalating tariff war between the U.S. and China but will have to rely more on diplomacy than economic might post-Brexit to avoid being caught in the crossfire. Nevertheless, the Labour government has dipped into the U.K.’s retaliation playbook from the first Trump administration and could immediately strike back with duties on those familiar targets: Harleys, Jack Daniel’s and Levi’s. Carrots to sweeten a deal for the U.K. to avoid duties are more useful, trade experts say, like aligning with the U.S. on its hefty duties against Beijing by opening an investigation into state subsidies for China’s electric vehicle industry and buying more American oil and gas. HOW WILL IT PLAY OUT?  British Prime Minister Keir Starmer wants talks for a U.K.-U.S. trade deal with Trump’s team to get going in the weeks ahead, he told POLITICO in an interview Thursday. The PM and Trump have already discussed meeting in the U.S. next month. “I have been clear that we would like to have discussions about a trade deal with the U.S.,” Starmer said. Ministers are reportedly now increasingly confident that Trump won’t immediately slap tariffs on U.K. exports. But worries linger: “Any G7 trade minister like myself would be concerned about the talk of tariffs,” U.K. Business and Trade Secretary Jonathan Reynolds told POLITICO last November. While he’s likely to go after other countries first, British ministers are still preparing for the worst, with one senior trade official pointing out that “there is some low-hanging fruit that we might be vulnerable to.” They wouldn’t get into specifics, but the U.K.’s automotive and pharmaceutical sectors are often brought up by trade experts as pressure points with supply chains in China. Negotiating a U.K.-U.S. trade deal with Trump would still see Labour draw red lines on food standards, but No. 10 says Starmer has spoken at Cabinet about “his determination to pursue a partnership with the US for the 21st century, which would protect security, advance our economic growth and leverage the opportunity of new technologies.” That sounds a lot like he has a security and tech pact in mind. back to Top LATIN AMERICA — Jakob Weizman TRUMP’S THREATS Like Europe, Latin America has painful memories of a dispute over the steel and aluminum duties Trump imposed in his first term. But, with the U.S. enjoying a trade surplus with South and Central America, the main concern there is that Trump’s punitive tariffs against Beijing could unleash a flood of redirected Chinese exports.  THE RETALIATION PLAYBOOK South America lacks the depth of trade cooperation that — still — exists between the U.S., Canada and Mexico in their common free-trade area, or in the European Union for that matter. And, whereas Argentina’s right-wing populist President Javier Milei was the first foreign leader to pay homage to Trump at Mar-a-Lago on his election victory, Luiz Inácio Lula da Silva’s Brazil has fought running legal battles with Trump crony Elon Musk and his X social media platform. Both are members of the Mercosur trade bloc, which includes Paraguay and Uruguay, and which finally sealed a trade deal with the European Union in December after 25 years of trying. Importantly, that deal put up some preemptive protection against a potential flood of Chinese electric vehicle imports by establishing safeguards — effectively a trigger to impose higher tariffs once a critical import threshold is hit. Yet a lack of unity among the bloc’s members might make it difficult to maintain a common front in the face of trade stress with the U.S. and any further expansion into the region by China, which is already investing in local EV production. That’s especially so with Brazil dominating Mercosur and having a seat at the table in the BRICS emerging markets forum. HOW WILL IT PLAY OUT?  Trump’s attempt to contain China’s international expansion may come up short, and it’s likely that Latin America will end up being more of a bone of contention between Brussels and Beijing. The region’s raw materials and rising integration into global trade networks make it a geopolitical battleground, with China holding the high cards and Europe held back by its restrictive rules of engagement and a lack of enthusiasm to do deals. Regarding freer trade with the EU: “The real concern is that it might foster a much stronger relationship between the EU and Brazil rather than between the EU and Mercosur as a whole,” says Argentinian economist Riccardo Carciofi, cautioning that this could spill over into further national discrepancies in bargaining power towards other trade partners.  back to Top MITIGATION OPTIONS Aside from trade retaliation, countries and regions have other options to try and mitigate Trump’s trade onslaught: They can do trade deals with each other, for example, or agree workarounds at the World Trade Organization to uphold the established rules of international trade — even if the U.S. no longer wants to. For the EU and Latin America, ratifying the Mercosur deal would open up important export markets. But with France leading a rearguard action to kill the pact, that is by no means a slam dunk — and China in any case knocked Europe off the top spot as Mercosur’s top trading partner years ago. The U.K., meanwhile, recently joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a 12-nation group that includes Canada and Japan. Work is under way to set up a new CPTPP secretariat to coordinate on Trump’s trade threats. The U.K. and EU also want to ramp up trade talks with India — although deals look challenging. As well as refreshing its Mexico deal, Brussels wants to talk to Indonesia and Malaysia too. The U.K. has committed to resetting relations with the EU after a long post-Brexit stalemate, including plans for a veterinary agreement to smooth the flow of trade. Ministers have also hinted at closer alignment on chemicals and mutual recognition of qualifications. While potentially beneficial for U.K.-EU trade, closer alignment with EU rules could undermine the U.K.’s negotiating leverage in any trade talks with the U.S. As countries seek to parry Trump’s trade thrusts, dispute filings are sure to pile up — and get stuck — at the WTO. Its highest appeals court, the Appellate Body, has been out of action since the first Trump administration blocked judicial appointments. Now, after years of talks on reforming the court, Trump’s return is likely to again stall progress. Countries that still want to play by the rules have, meanwhile, created their own backup dispute panel. Taken together, the mitigation strategies might offer marginal relief — but would be nowhere near sufficient offset the hit to trade, growth and prices of a full-scale tariff war with the United States. That leaves those on the receiving end of Trump’s tariff onslaught hoping that his strategy might end up looking something like theirs: Escalate to de-escalate. back to Top -------------------------------------------------------------------------------- Sue Allan reported from Ottawa, Ari Hawkins, Doug Palmer and Phelim Kine from Washington, Camille Gijs and Jakob Weizman from Brussels, and Graham Lanktree and Sophie Inge from London. Graphics by Paroma Soni.