BRUSSELS — Belgian Prime Minister Bart De Wever on Thursday evening ratcheted up his objections to the European Commission’s plan to use some €140 billion of frozen Russian assets held in Brussels to bolster Ukraine — dashing EU hopes of a breakthrough on mobilizing the assets. De Wever’s intervention — in a strongly-worded letter to European Commission President Ursula von der Leyen and seen by POLITICO — came only hours before the EU executive is expected to issue a proposal addressing Belgium’s concerns on using the funds. The Commission is pushing for the 27 EU member countries to strike a deal at a European Council summit next month so that the billions of Russian reserves held in the Euroclear bank in Belgium can be freed up to support Kyiv with a reparations loan. De Wever is resisting the “fundamentally wrong” scheme over fears Belgium will be on the hook to repay the cash if Russia sues. Hopes had grown in recent days that De Wever could reverse his position if the European Commission were to offer him legal guarantees in the proposal that Belgium would not be financially exposed. But despite increasing diplomatic pressure for Belgium to cave, De Wever on Thursday only increased his hostility to the Commission’s plans. Expanding on his previous objections, the Belgian leader argued the Commission’s scheme would block a peace deal in Ukraine. If the EU’s plan does not come to fruition, the Russian assets will instead be used as a bargaining chip to bring Moscow to the negotiating table, rather than being paid to Kyiv, he said. “Hastily moving forward on the proposed reparations loan scheme would have, as a collateral damage, that we as EU are effectively preventing reaching an eventual peace deal,” De Wever wrote in the letter. After a prolonged standoff, the Commission is expected to finally put forward a formal proposal outlining the loan on Friday, or early next week. After failing to reach a deal in October, EU leaders are set to tackle the most sensitive issues in their next summit in mid-December. While a majority of countries back the loan, De Wever is unconvinced. “In the very probable event Russia is ultimately not officially the losing party, it will, as history has shown in other cases, be legitimately asking for its sovereign assets to be returned,” De Wever continued in the letter. The Belgian leader restated the loan would trigger mayhem in the EU’s financial markets, and expose EU taxpayers to repaying the full amount if the assets are returned to Russia. Instead of tapping the Russian reserves, De Wever suggested that the European Commission should issue €45 billion in joint debt to cover Ukraine’s financial needs in 2026 ― an idea that is unpopular among most EU governments because it involves using taxpayers’ money. Restating his traditional position, the Belgian leader said he would agree to the loan only if governments agree to immediately stump up the full amount if Russia reclaims the assets. “I will not agree unless these guarantees, as stipulated above, are delivered and signed by member states at the time of decision,” he wrote.

EINDHOVEN, The Netherlands — “You don’t see me lash out against other parties that often.” Henri Bontenbal, leader of the center-right Dutch Christian Democratic Appeal, has just finished a two-hour event at the High Tech Campus in Eindhoven when reporters asked why he avoids sparring with far-right leader Geert Wilders ahead of this month’s national elections. Bontenbal, a former energy consultant and a relative newcomer to politics, is sitting on the stage where he has nerdily lectured an audience about the importance of collaboration and trust in the political realm. “Other parties occasionally give us a slap,” he admits. “But we continue to tell our own story.”  Bontenbal entered the political arena in an era defined by characters such as Wilders and Donald Trump. It’s also a time when politicians continuously attack each other and make outlandish claims in a snackable format on social media. But Bontenbal has taken a different approach. “Bontenbal is in many views the anti-populist,” wrote Simon Van Teutem, a Dutch columnist at news site The Correspondent, in a September profile. The approach is fitting for the 42-year-old, raised as one of eight in a Protestant family in Rotterdam, who takes pride in sharing that he still reads the Bible daily. After two chaotic years, Bontenbal’s message of decency, stability and trust is suddenly resonating with voters.  Dutch voters head back to the polling booths on Oct. 29, after the last government fell barely a year into office. The CDA is neck and neck for second in the polls alongside a joint Socialist-Greens ticket, at around 24 seats, behind Wilders’ far-right PVV at 31 seats. That’s set to make the party one of the election’s big winners and Bontenbal a potential kingmaker in government negotiations. Bontenbal’s political career began unexpectedly in 2021, when he became a temporary member of parliament, filling in for the illustrious former politician Pieter Omtzigt. In the November 2023 elections, CDA’s support crumbled to five seats shortly after Bontenbal had taken over — in part because of the success of Omtzigt’s new rival party. Back then, Bontenbal’s leadership of the center-right seemed doomed. Fast forward two years and the mood in Eindhoven, a breeding ground for top companies including ASML and Philips, is bright. The venue in the Netherlands’ “smartest square km” is packed for an event in honor of a local candidate. But Bontenbal — known to voters as Henri — is top of the ticket. Beer mats read “Henri, one more round?” On the tables are copies of his new book, It Really Can Be Different. On stage in Eindhoven, Botenbal lists four priorities for the election, “which we all know are top of the list”: housing shortages, how to handle asylum seekers, the country’s nitrogen crisis and investments in the economy of the future.  He also doubles down on the Netherlands’ longing for political calm, as the country nears the third election in under five years. He champions “stability,” “decency,” and “trust” and wears being boring as a badge of pride.  Addressing a venue packed with entrepreneurs, he promises them a “reliable government” and a long-term investment agenda. “If I speak to entrepreneurs, the first they ask for is not to lower taxes, but what they ask for is: can you please keep things stable in the next few years?” Bontenbal’s spiel is geared toward welcoming the centrist Christian Democratic voters back, as much through style as substance. “The country is longing for a stable government,” he told a candidates’ TV debate Thursday — adding that while Wilders is “the best megaphone for dissatisfaction and anger,” he feels that politicians can do better. “Politics is not a theatre, not a circus,” Bontenbal told the talk show RTL Tonight recently after an analyst said that TV viewers had perceived him as decent yet boring in the first televised debate.  “I’m not ordered to be the funniest or to make the craziest remarks,” Bontenbal added. Being boring is a quality, the analyst agreed.

The Bank of England is nearly certain to cut rates on Thursday, hoping to get ahead of a U.K. economic slowdown brought on by U.S. trade tariffs. Analysts expect the Bank’s Monetary Policy Committee to lower the Bank Rate to 4.25 percent from 4.5 percent, which would represent the fourth such cut in the last 12 months. The MPC had voted to keep rates steady at its March meeting, but the potential economic fallout from the U.S.’s wide-ranging tariffs announced on April 2 have bolstered the case for greater action to support the economy. At the International Monetary Fund’s spring meeting last month, Bank of England Governor Andrew Bailey said he was focused on the “growth shock” that may come as a result of the tariffs. The IMF said at the time it expects Britain’s economy to only grow 1.1 percent this year as a result of the trade disruption, down from a previous estimate of 1.6 percent. “Donald Trump’s tariffs have caused a massive reappraisal of the future path of U.K. interest rates,” Laith Khalaf, head of investment analysis at AJ Bell, wrote in a note to clients on Wednesday. “As things stand, markets are focusing on the collateral damage to the U.K. economy rather than the potential for a trade war to ignite inflation once again.” Khalaf noted that markets are pricing in a 50 percent chance that, by December, the Bank Rate will be at least 1 percentage point lower than where it stands now. That would represent a clear acceleration in the pace of policy easing, given that so far, the BoE has only cut once a quarter. Deutsche Bank senior economist Sanjay Raja said he expects the Bank to stop referring to the likely course of policy easing as “gradual” and instead say that “the ‘scale and pace’ of any rate cuts would be conditional on the economic outlook.” That assumption faces at least one significant hurdle, however. While prices for trades goods and services may weaken as the economy slows, the prices of services controlled by the government are under serious upward pressure. Water bills rose by an average of 26 percent nationwide at the start of April, while regulated household energy bills rose 6.4 percent and council tax bills rose by between 5 percent and 10 percent. All that is likely to stop any further improvement in services inflation, which has been the BoE’s bugbear for the last couple of years. Despite easing in recent months, it still stood at 4.7 percent in March. However, the clinching factor for the Bank may be the pound: Since the U.S. tariff dump, it has defied expectations of fresh declines, rising 4.5 percent against the dollar. That is helping to keep the cost of key imports down — especially oil. Bank of England Governor Andrew Bailey said he was focused on the “growth shock” that may come as a result of the tariffs. | Neil Hall/EPA Crude oil prices have fallen to four-year lows even in dollar terms, due to a combination of weak global demand and a big rise in output from OPEC and its allies, scheduled for June. SILVER LININGS Fortunately for the Bank, economic data since the start of the year has generally surprised on the upside after effectively stagnating for the last two quarters. Strong February and preliminary March figures point to growth of more than double the MPC’s forecast of 0.1 percent in the first quarter, Deutsche’s Raja. There’s good news on the labor market front as well. Wage growth has been falling faster than the Bank expected, but without any dramatic uptick in redundancies. “[W]hile the jobs market is getting cooler, we’re not seeing any of the classic warning signs you’d normally start to see in a recession,” wrote James Smith, an economist at Dutch bank ING.

LONDON — Northern Irish businesses will be on the hook for millions if the European Union retaliates against U.S. President Donald Trump’s trade war. While the EU is finalizing its battle plan, Keir Starmer insists his government will take a “cool” and “calm-headed” approach to Trump. But fears are mounting over a system allowing firms in Northern Ireland — which is part of both the U.K.’s and EU’s markets — to claim back EU tariffs imposed on U.S. imports. The system simply “doesn’t work effectively and quickly enough,” a senior U.K. business representative told POLITICO. Last year Northern Ireland imported £753 million in U.S. goods. Firms in the region will need to stump up potentially millions in extra costs if EU retaliatory tariffs kick in, thanks to Northern Ireland’s post-Brexit status. “Are there going to be special measures to protect Northern Irish businesses from those tariffs? And how quickly will reimbursement measures be put in place?” asked the senior U.K. business representative, who was granted anonymity to speak candidly. Even before Trump’s trade war, firms were having a hard time getting their money back, with some paying millions out of pocket, they said. “The volume of evidence that’s required costs a lot of money and time and effort,” said Stephen Kelly, CEO of industry group Manufacturing NI. “Multiply that by thousands of product lines, which is what the EU is proposing, and we start to run into the real problems here.” POST-BREXIT HEADACHE Northern Ireland has featured in a flurry of diplomacy between London and Brussels this week. Chancellor Rachel Reeves spoke with EU Trade Commissioner Valdis Dombrovskis the morning of Trump’s announcement about what “the appropriate response” to the president’s moves would be. The U.K.’s trade chief spoke to Northern Ireland’s leadership the same day. Starmer has said his Labour government is “looking carefully at the details of any retaliatory tariffs announced by the EU … and what impact they might have on businesses.” But while Trump imposed 10 percent tariffs on the U.K., only half the rate levied on the EU, “no one is celebrating,” Manufacturing NI’s Kelly said. He wants London and Brussels to go further. The two capitals need to trigger the Brexit trade deal’s committees, he urged. “We need them to come together under their joint committee to fully explore” the impact on Northern Ireland and “mitigations” for its firms.  In Brussels “we need [EU Commissioner for Trade and Economic Security] Maroš Šefčovič to be standing up in those meetings and saying ‘we have a treaty responsibility alongside the United Kingdom Government to Northern Ireland,’” Kelly said. “How can we compensate traders there that doesn’t undermine their financial viability?” ‘UNABLE TO RECOVER THE TARIFF’ Northern Ireland’s unionist Deputy First Minister Emma Little-Pengelly has also warned that the duty reimbursement scheme isn’t up to scratch. It is “not fit for purpose for businesses,” she said Thursday. One of Manufacturing NI’s members, Kelly said, sought what would have been a small amount of money, a few hundred pounds, from the scheme, he said. “It took three days to capture the information and go and find it.” Data required to make a claim includes details about the supply chain and where the product comes from, as well as shipping information, product codes, value, weight, names of people involved in the shipping, confirmation that it left and arrived and more. The firm’s application was eventually rejected. “There wasn’t enough information that was available,” Kelly said, explaining that the burden of evidence to prove goods won’t travel on to the EU’s Single Market is “exceptionally high.” This means that “lots of people have been unable to actually recover a tariff that’s due to them,” he said. “And even more businesses have not even attempted even going there.” ANGER IN NORTHERN IRELAND Northern Ireland’s singular predicament in Trump’s trade war has angered unionist politicians.  “Northern Ireland’s response to the actions of the United States is decided for us by a foreign government, the European Commission, in which we are not represented,” Traditional Unionist Voice MP Jim Allister told POLITICO.  “Conversations about the response are going on within the EU right now, but they do not involve us. In this we have to face the fact that Northern Ireland is now effectively the largest colony in the world because the biggest manifestation of U.K. democracy, in which over 17 million people voted for the U.K. to leave the EU, still has not been honored.” He added: “The [U.K.] government will no doubt seek to minimize the difficulty arising from the resulting import tariff differential between Great Britain and Northern Ireland … by means of the duty reimbursement scheme. However, Northern Irish businesses tell me that the administrative cost of accessing the scheme are such that they have so far concluded that it is not worth their while.  “They have instead decided not to grow their businesses as they would have had Northern Ireland been a full and proper part of the U.K. single market for goods, able to rely on the U.K. imports regime.” ‘ALERT TO THE SITUATION’ Speaking in the U.K. parliament on Thursday morning, Democratic Unionist Party MP Jim Shannon said Northern Ireland “remains exposed to potential EU retaliation,” and warned that “local businesses must not become collateral damage.” Responding to the DUP’s concerns Thursday, Trade Secretary Jonathan Reynolds said: “We’ve got to be alert to the particular situation that would occur in the occurrence of a different retaliatory stance from ourselves and the EU.”  He added that the Duty Reimbursement Scheme was “key” to addressing this. “We need to work together particularly in relation to Northern Ireland to make sure that specific voice, that specific question, is a key part of how we look at this and respond.” A U.K. government spokesperson said it would “work closely with business on this issue, to help ensure they get as much support as possible in navigating these challenges, as we move to the next phase of our plan, and continue negotiations with the U.S. on an economic prosperity deal.” A Commission spokesman confirmed that the U.K. government and the European Commission were in contact on the issue. 

HELSINKI — The EU should prioritize politics over economics and retaliate against Donald Trump, one of the European Central Bank’s top policymakers said. In an interview with POLITICO, Bank of Finland Governor Olli Rehn urged the European Union to prepare “proportionate countermeasures” to the United States president’s imposition of tariffs on imports from the bloc. “There is an economic and a political logic,” Rehn, a former European economy commissioner, said. “Many economists advocate non-retaliation, because [retaliatory] tariffs would harm oneself. But … it’s not only about economics, it’s also about politics, and politics does affect the economy.” Rehn’s comments, like those of ECB President Christine Lagarde on Monday,  suggest some confidence that the eurozone economy can withstand a trade war with its biggest trading partner. The ECB estimates that the first wave of U.S. tariffs could take 0.3 percentage points off gross domestic product over the next year — and 0.5 percent if the EU retaliates in kind. Central bankers past and present have been split over how best to respond to a political shift that goes against the liberal economics they usually stand for. Rehn’s comments position him closer former Bank of England Governor Mark Carney than to his former boss at the ECB, Mario Draghi. Since taking over as Canadian prime minister on March 14, Carney has continued his predecessor Justin Trudeau’s policy of “dollar-for-dollar” retaliatory tariffs, while Draghi has argued Europe may be better off holding back, given that it is more dependent on external trade than is the U.S. With characteristic understatement, Rehn noted that  “quite a lot has happened” since the ECB’s Governing Council last met on March 6. U.S. policy has hurt the growth outlook but European policy — especially Germany’s far-reaching plans to raise spending on defense and infrastructure — should boost it. “If you look at the impact of these two factors, they may create both upside and downside risks to inflation,” Rehn said. Away from tariffs, the Brussels veteran has enthusiastically embraced the European Commission’s efforts to mobilize more funds for European defense, in the face of what he called an “existential threat” from Russia. He supported a Commission proposal to borrow €150 billion to lend to EU governments under a rearmament plan. This would amount to repackaging bonds from different countries in the form of a European “safe asset,” structured in a way to limit overall risk. “We need to find a combination of national and European solutions,” Rehn said. He applauded as “extremely important” the recent announcement by Germany — one country that does have room for more public debt — that it was lifting its national borrowing restrictions and paving the way for increased defense spending. And while he stopped short of advocating the outright seizure of the €200 billion in Russian reserves frozen in European depositaries, he urged that the funds be put to “meaningful” use. So far, they are only being used as collateral for €50 billion in loans from G7 countries to Ukraine. “I am aware of the legal challenges,” Rehn said, “but this has been discussed in the G7 context and if there is a will, there is a way.”

Cracks are appearing in the European Central Bank’s united front as the urgent need for cash to rearm Europe threatens to overpower legalistic and technocratic concerns about how the single currency should be managed. The implicit withdrawal of American security guarantees from Europe last week following a heated Oval Office clash between U.S. President Donald Trump and Ukrainian President Volodomyr Zelenskyy has sent European leaders scrambling for ways to bolster defense spending quickly. Largely strapped for cash and already groaning under heavy debt burdens, Europe’s politicians are now mulling whether to seize some €200 billion in Russian central bank reserves currently frozen in Belgium and being used as collateral for a €50 billion loan from the G7 to Ukraine. Traditionally, the Frankfurt-based ECB has warned against any more aggressive action, saying it could damage the standing of the euro in global financial markets. But on Friday, Mārtiņš Kazāks, governor of the Bank of Latvia, was the first member of the ECB’s Governing Council to endorse the move for outright seizure, telling POLITICO that it was a “viable option to help Ukraine in its fight for freedom and against aggression.” The comments, conspicuously from a country on Europe’s front line with Russia, are an acknowledgement that more radical action is needed, even at the cost of sending yet another shock through global markets. They hint that rapidly shifting reality on the ground may force a new consensus in Frankfurt. In addition to Kazāks, officials at other Baltic central banks also privately endorse outright seizure, even if their official position is different, said one person familiar with the matter. Neither the Estonian nor Lithuanian central banks responded to a request for comment. In conversations with POLITICO, several Eurosystem officials — granted anonymity to discuss a sensitive matter freely — suggested that the shock of Trump’s abandonment of Europe had weakened their position, and reluctantly accepted that politicians would likely do as they pleased. CHANGING REALITIES However, in public at least, ECB President Christine Lagarde is still trying to hold the line. In guarded comments on Thursday, the Frenchwoman as usual highlighted the legal risks of confiscation. But she acknowledged that the ECB’s role is merely advisory and that the decision is in the hands of governments. “We have made our position quite clear,” Lagarde told reporters. “I would certainly submit that the international law basis on which any decision is made will matter as far as other investors are concerned, and I’m sure it’s another element that will be taken into account” by decision makers. The ECB’s long-standing opposition is well-rooted in both law and tradition. Skeptics say that seizing the Russian funds would imply that assets held in Europe by other central banks are not safe, undermining faith in the single currency as a reserve currency and risking a loss of credibility, particularly among countries in the global south. That would undo years of European efforts to try to build the euro up into an alternative to the dollar — just at the moment when the U.S.’s increasingly erratic behavior on the international stage is making the need for an alternative more urgent. Last week’s heated clash between U.S. President Donald Trump and Ukrainian President Volodomyr Zelenskyy has sent European leaders scrambling for ways to bolster defense spending quickly. | Pool image by Jim Lo-Scalzo/EFE via EPA And it’s not just what the move would say about the euro, but what it would say about the eurozone as a place to do business. Judith Arnal, an associate research fellow at CEPS, said the move would also erode faith in the region’s clearing and settlement systems, which act as custodians not just for euro assets but also for dollar ones (including some held by China). Seizure, and the precedent it would set, could further isolate the EU at a time when the U.S. is aiming to reconcile with Russia, Arnal said. “Without U.S. backing, the move could face greater international scrutiny, making it harder to justify and implement, while amplifying the risk of retaliatory measures from non-Western actors,” she said. A HARSHER WIND BLOWS But needs must when the devil drives, and the temptation to plunder one of the biggest cash piles on the planet is growing daily. Harijs Rokpelnis, a top official in the Greens and Farmer’s Union, a member of Latvia’s ruling coalition, said the urgency of the moment requires that politicians ignore the ECB’s advice, however sound it may be. “Looking from the purely technocratic view of economics, they have a point,” he acknowledged, while pushing for seizure nonetheless. The ECB, in turn, can maintain its technocratic position to save face, and both sides can agree to disagree, he added. Certain central bankers may privately agree with seizing the assets, said two other people, and are more than happy for politicians to go along with it. Some argue the ECB has the tools to deal with any problems that seizure might cause. Elina Ribakova, an analyst with the Peterson Institute for International Economics in Washington, argued that the invocation of financial stability risks has typically been a euphemism for the dumping of eurozone government bonds by countries such as China or Saudi Arabia. But the ECB, she said, could counter this with its emergency bond-buying tool, known as the Transmission Protection Instrument, which exists explicitly to stop unjustified distortions in bond markets. TOUGH CHOICE How politicians and central bankers resolve the issue will say a lot about the balance of power between the two, at a time when the traditional authority and independence of the ECB has been weakened by a prolonged overshoot of inflation. Lagarde and the ECB’s body of experts in Frankfurt may yet prevail. The influence of regional central bank governors — who participate in monetary policy decisions but don’t have much say on Frankfurt’s institutional stance — is limited. But the debate reveals how political concerns can chip away at its ability to defend the currency. It’s a particularly sensitive moment for the Eurosystem’s national governors, who are appointed by their respective governments. Six of the 20 on the ECB Governing Council have terms expiring this year. Those seeking reappointment, and candidates looking to succeed outgoing governors, may be more than usually unwilling to risk offending their capitals. It isn’t that the ECB is allergic to getting involved in politics. The central bank has come under fire for its focus in recent years on climate change, as well as its forging ahead on the so-called digital euro, a pan-European payments platform that some see as de facto industrial policy. But its first reflex — and its legal mandate — has always been to protect the value of the currency, and to shy away from anything that jeopardizes it. “All in all, even if there is increasing political will to seize Russian sovereign assets, financial stability risks remain,” said Arnal at CEPS. “Political priorities do not change the substance of things.”

LONDON — Northern Ireland could suffer collateral damage in U.S. President Donald Trump’s impending trade war with the European Union — thanks to its hybrid status post-Brexit. The EU is firmly within Trump’s sights in his escalating tariff raid, with the president promising retribution for the bloc’s “brutal” trade practices by threatening 25 percent tariffs, claiming the bloc was created to “screw the United States.” In turn, the EU has warned that Trump’s protectionist policies “will not go unanswered.” U.K. ministers, meanwhile, are scrambling for an exemption to fresh tariffs, in the hope that the country’s “balanced” trading relationship with the U.S. could mean Trump takes a softer approach to Britain than its neighbors across the channel. But tariffs from any side could create a fresh Brexit headache for traders in Northern Ireland, which is part of the U.K. but has no hard border with the Republic of Ireland. The prospect has already got unionists hot under the collar, while others spy an investment opportunity.  The biggest issue, according to Joël Reland, a senior researcher at the Brexit think tank UK in a Changing Europe, is if the EU introduces retaliatory tariffs on U.S. imports — something the bloc has insisted it is not afraid to do. “At that point, Northern Ireland would have to levy the EU tariff at its external border,” he said, pointing to complex post-Brexit rules set out in the Windsor Framework agreed between the U.K. and EU to smooth the flow of trade in Northern Ireland.  Reland noted that, under a Duty Reimbursement Scheme set out in the framework, importers in Northern Ireland would technically be able to reclaim the difference between U.K. and EU duties if they can prove that goods will not move on into the EU.  “But I can imagine having to reclaim a tariff is still going to make life more complicated for Northern Irish importers,” he said. ‘BACKDOOR INTO THE SINGLE MARKET’ Esmond Birnie, a senior economist at Ulster University and former Ulster Unionist Party member of the Northern Ireland Assembly, has spied another complication with a possible EU tariff regime. “If, as is likely, the EU retaliates with tariffs on U.S.-origin goods, there would be an EU concern about any American products using Northern Ireland as a backdoor into the Single Market,” he explained. Birnie also fears Northern Ireland stands to lose if the U.S. imposes tariffs on the EU.  Northern Ireland could suffer collateral damage in U.S. President Donald Trump’s impending trade war with the European Union. | Andrew Harnik/Getty Images “The key thing,” Birnie explained, “is [Northern Ireland’s] hybrid status — [it is] still part of the U.K. internal market, but de facto in the EU’s Customs Union. So it is conceivable any U.S. tariffs against EU products could apply to Northern Ireland origin goods,” he explained.  Birnie predicted that Northern Ireland customs and businesses could try to “evade” tariffs by rerouting sales to the U.S. and purchases of U.S. goods through Great Britain.  However, he added, “there would be extra cost in doing so, for example, ferrying good from Belfast to Liverpool and then on to New York.” It could also cause checks at the Irish Sea border to intensify to control for such activity, he fears. But Billy Melo Araujo, a law professor at Queen’s University Belfast, believes this scenario is unlikely. “If the U.S. decides to apply tariffs on the EU, the effect on Northern Ireland should be limited because goods originating from Northern Ireland count as U.K. goods, unless we’re talking about EU goods that were moved into Northern Ireland and then exported to the U.S., or goods assembled in Northern Ireland which contain a lot of EU inputs, such as complex industrial goods.” ‘IDEAL MIDDLE-GROUND LOCATION’ Sam Lowe, a partner and trade expert at Flint Global, warned that Northern Ireland’s hybrid status could also be exploited by Irish exporters hoping to avoid U.S. tariffs.  “Due to the high risk of circumvention, [such as] Irish products being shipped [to the U.S.] via Northern Ireland, I would expect greater scrutiny of Northern Irish exports, particularly if there is a noticeable uptick, and stricter rules of origin enforcement,” he said. But an uptick in goods moving via Northern Ireland is not necessarily such a bad thing, a senior Stormont official, granted anonymity to speak on a sensitive issue, told POLITICO. “The [Northern Ireland] Protocol and Windsor Framework give Northern Ireland a potential trading and investment advantage even in regards to transatlantic tariffs,” the official said.  “The risk of U.S.-EU tariffs might open opportunities for us even as they, inevitably, create new costs and red tape for everybody. We’re well used to that because of the whole Brexit saga. “If it happens again with a new landscape of long-term tariffs, it will probably be a mixed bag for us — hassles and irritants in the global supply chain and unintended consequences, to be sure, but also a chance for Northern Ireland to put itself forward as an ideal middle-ground location for a manufacturer that wants to avoid U.S. tariffs on EU goods and wants to be able to export equally into the EU, the U.S. and the rest of the U.K.” According to the latest trade data from 2023, Northern Ireland goods and services exports outside the U.K. totaled £16.2 billion, of which £1.9 billion was destined for the U.S. market. By contrast, exports from the Republic of Ireland to the U.S. totaled around €58 billion that year. ‘UNINTENDED CONSEQUENCES’ Unsurprisingly, not everyone feels the same way in Northern Ireland’s fraught political landscape, with a number of Unionist MPs jumping on the issue in the weeks following Trump’s inauguration. Northern Ireland customs and businesses could try to “evade” tariffs by rerouting sales to the U.S. and purchases of U.S. goods through Great Britain. | Paul Faith/Getty Images Upper Bann MP Carla Lockhart told POLITICO Northern Irish businesses “should not be disadvantaged by barriers that do not apply to firms in Great Britain.” “The government must be alive to unintended consequences that leave our economy at a disadvantage. We need a fair and pragmatic approach that supports jobs, investment, and Northern Ireland’s place within the UK’s internal market,” she said. North Antrim MP and Traditional Unionist Voice leader Jim Allister called for an “ending [of] the current arrangement whereby part of the U.K. has left the EU and part of the U.K. remains in it.” “The government should do so by declaring the Windsor Framework void, on the grounds that it is contrary to the cardinal principle of international law which requires valid treaties to respect for the territorial integrity of sovereign states,” he said. Asked how the U.K. would protect Northern Ireland from tariffs in the House of Lords on Tuesday, Business and Trade Minister Maggie Jones was vague. “We are considering what action will be in the best interests of all U.K. businesses and will make sure the implications for Northern Ireland are considered in those discussions,” she said. 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.

BRUSSELS — The European Union is ready to compensate financially for the United States’ exit from a long-negotiated multilateral deal to provide Ukraine with a $50 billion loan to help support its fight against Russia, a top Polish official said. Speaking at an event marking the incoming Polish presidency of the Council of the EU on Wednesday, Paweł Karbownik, Poland’s deputy finance minister, said “there is a risk that [US President] Donald Trump will pull out of the $50 billion agreement.” It comes as Speaker of the U.S. House of Representatives Mike Johnson dismissed on Wednesday the outgoing Joe Biden administration’s request to include $24 billion in Ukraine-related aid in a spending bill Congress needs to pass by Dec. 20. “We have a newly elected president and we’re going to wait and take the new commander-in-chief’s direction on all of that so I don’t expect any Ukraine funding to come up now,” Johnson said. After many months of negotiations, G7 countries agreed in October to provide a $50 billion loan to Ukraine that is structured to be repaid with interest derived from more than €200 billion of immobilized Russian assets in Western control. According to the agreement — which was struck before the U.S. election on Nov. 5 — Brussels and Washington are set to put up $20 billion each, with the United Kingdom, Canada and Japan contributing the remaining share. While the U.S. originally expressed concerns about the financial viability of the loan, the Biden administration eventually pledged to contribute $20 billion in an attempt to corner Trump into continuing American support for Ukraine. Given the level of uncertainty, Karbownik urged Trump to make his intentions known sooner rather than later to allow the EU time to create a contingency plan. If the worst-case scenario were to happen, Karbownik added, “we’ll make provisions as the EU to ensure that the $50 billion goes to Ukraine regardless of Trump.” European Commission President Ursula von der Leyen previously signaled the EU alone could provide up to €35 billion if the U.S. was unable to commit to its share. The EU has since indicated it could scale up its financing of Ukraine by using the might of the bloc’s €1.2 trillion seven-year budget as collateral. Brussels, however, cannot go beyond an end-of-year deadline to issue the loan, according to its own budget rules. Karbownik said that the EU’s final amount “will be decided by the end of the year.” Jordain Carney contributed reporting.