Donald Trump started his second term by calling the European Union an “atrocity” on trade. He said it was created to “screw” Americans. As he imposed the highest tariffs in a century, he derided Europe as “pathetic.” And to round off the year, he slammed the continent as “weak” and “decaying.” In the midst of all this, Ursula von der Leyen, the EU’s top official, somehow summoned the composure to fly to Trump’s Scottish golf resort to smile and shake hands on a one-sided trade deal that will inflict untold pain on European exporters. She even managed a thumbs up in the family photo with Trump afterwards. Yes, it’s been one hell of a year for the world’s biggest trading relationship. The economic consequences will take years to materialize — but the short-term impact is manifest: in forcing Europe to face up to its overreliance on the U.S. security umbrella and find new friends to trade with. With a warning that the following might trigger flashbacks, we take you through POLITICO’s coverage of Europe’s traumatic trade year at the hands of Trump: JANUARY As Trump returns to the White House, we explore how America’s trading partners are wargaming his trade threats. The big idea? Escalate to de-escalate. It’s a playbook we later saw unfold in Trump’s clashes with China and Canada. But, in the event, the EU never dares to escalate. Trump’s return does galvanize the EU into advancing trade deals with other partners — like Mexico or Latin America’s Mercosur bloc. “Europe will keep seeking cooperation — not only with our long-time like-minded friends, but with any country we share interests with,” von der Leyen tells the World Economic Forum the day after Trump is sworn in. FEBRUARY As Trump announces that he will reimpose steel and aluminum tariffs, von der Leyen vows a “firm and proportionate response.” The bloc has strengthened its trade defenses since his first term, and needs to be ready to activate them, advises former top Commission trade official Jean-Luc Demarty: “Especially with a personality like Trump, if we don’t react, he’ll trample us.” That begs the question as to whether trade wars are as easy to win, as Trump likes to say. The short answer is, of course, “no.” Trade Commissioner Maroš Šefčovič, meanwhile, packs a suitcase full of concessions on his first mission to Washington. At the end of the month, Brussels threatens to use its trade “bazooka” — a trade-defense weapon called the Anti-Coercion Instrument — after Trump says the European Union was created to “screw” America. MARCH We called it early with this cover story by Nicholas Vinocur and Camille Gijs: Trump wants to destroy the EU — and rebuild it in his image. As Trump’s steel tariffs enter force, Brussels announces retaliatory measures that far exceed those it imposed in his first term. And, as he builds up to his “Liberation Day” tariff announcement, the EU signals retaliation extending beyond goods to services such as tech and banking. (None of these are implemented.) APRIL “They rip us off. It’s so sad to see. It’s so pathetic,” Trump taunts the EU as he throws it into the sin bin along with China, Japan, Taiwan and Korea. In his Liberation Day announcement in the White House Rose Garden, Trump whacks the EU with a 20 percent “reciprocal” tariff. Von der Leyen’s response the next morning is weak: She says only that the EU is “prepared to respond.” That’s because, even though the EU has strengthened its trade armory, its 27 member countries can’t agree to deploy it. The bloc nonetheless busies itself with drawing up a retaliation list of goods made in states run by Trump’s Republican allies — including trucks, cigarettes and ice cream. MAY The EU’s hit list gets longer in response to Trump’s Liberation Day tariffs — with planes and automobiles targeted in a €100 billion counterstrike that looks scary on paper but is never acted on.  We report exclusively that Brussels is ramping up contacts with a Pacific trade group called the CPTPP. And we assess the chances of Trump pressuring the EU into a big, beautiful trade deal by threatening to raise duties on European exports to 50 percent. The verdict? Dream on!  JUNE The setting shifts to the Canadian Rockies — where a G7 summit takes on a G6 vs. Trump dynamic as other leaders seek ways to cooperate with him on Russia and China even as he pummels them with tariffs. Von der Leyen tries her best, turning hawkish on China in a bid to find common ground. Back in Brussels, at a European leaders’ summit, von der Leyen announces her pivot to Asia — floating the idea of a world trade club without the U.S. JULY As the clock counts down to Trump’s July 9 deal deadline, the lack of unity among the EU’s 27 member countries undermines its credibility as a negotiating partner to be reckoned with. There’s still hope that the EU can lock in a 10 percent tariff, but should it take the deal or leave it? The deadline slips and, as talks drag on, it looks more likely that the EU will end up with a 15 percent baseline tariff — far higher than Europe had feared at the start of Trump’s term. Brussels is still talking about retaliation but … yeah … you already know that won’t happen. With Trump in Scotland for a golfing weekend, von der Leyen jets in to shake hands on a historic, but one-sided trade deal at his Turnberry resort. Koen Verhelst also flies in to get the big story. “It was heavy lifting we had to do,” von der Leyen said, stressing that the 15 percent tariff would be a ceiling. AUGUST Despite the thumbs-up in Turnberry, recriminations soon fly that the EU has accepted a bad deal. EU leaders defend it as the best they could get, given Europe’s reliance on the U.S. to guarantee its security. The two sides come out with a joint statement spelling out the terms — POLITICO breaks it down. Not only does the EU come off worse in the Turnberry deal, but it also sacrifices its long-term commitment to rules-based trade in return for Trump’s uncertain support for Ukraine. The realization slowly dawns that Europe’s humiliation could be profound and long-lasting. With the ink barely dry on the accord, Trump takes aim at digital taxes and regulation that he views as discriminatory. It’s a blast that is clearly aimed at Brussels. SEPTEMBER The torrent of trade news slows — allowing Antonia Zimmermann to travel to Ireland’s “Viagra Village” to report how Trump’s drive to reshore drug production threatens Europe’s top pharmaceuticals exporter. OCTOBER EU leaders resist Trump’s pressure to tear up the bloc’s business rules, instead trying to present a red tape-cutting drive pushed by von der Leyen as a self-generated reform that has the fringe benefit of addressing U.S. concerns.    NOVEMBER Attention shifts to Washington as the U.S. Supreme Court hears challenges to Trump’s sweeping tariffs. The justices are skeptical of his invocation of emergency powers to justify them. Even Trump appointees on the bench subject his lawyer to tough questioning.  A row flares on the first visit to Brussels by U.S. Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer. Lutnick presses for concessions on EU digital regulation in exchange for possible tariff relief on steel. “Blackmail,” is the counterblast from Teresa Ribera, the EU’s top competition regulator. DECEMBER The year ends as it started, with another Trump broadside against Europe and its leaders. “I think they’re weak,” he tells POLITICO. “They don’t know what to do on trade, either.”

BRUSSELS — After its defeat by the British in the First Opium War, the Qing dynasty signed a treaty in 1842 that condemned China to more than a hundred years of foreign oppression and colonial control of trade policy.   It was the first of what came to be known as “unequal treaties,” where the bullying military and technological heavyweight of the day imposed one-sided terms to try to slash back its massive trade deficit. Sound familiar? Fast-forward nearly two centuries, and the EU is starting to understand exactly how that feels. European Commission President Ursula von der Leyen’s dash to Donald Trump’s Turnberry golf resort in Scotland last month to seal a highly unbalanced trade deal has raised fears among politicians and analysts that Europe has lost the leverage that it once thought it had as a leading global trade power.  Von der Leyen’s critics were quick to assert that accepting Trump’s 15 percent tariff on most European goods amounted to an act of “submission,” a “clear-cut political defeat for the EU,” and an “ideological and moral capitulation.” If she had hoped that would keep Trump at bay, a rude awakening was in store. With the ink barely dry on the trade deal, Trump doubled down on Monday by threatening to impose new tariffs on the EU over its digital regulations that would hit America’s tech giants. If the EU didn’t fall into line, the U.S. would stop exporting vital microchip technologies, he warned. His diatribe came less than a week after Brussels believed it had won a written guarantee from Washington that its digital rulebook — and sovereignty — were safe.  Trump can wield this coercive advantage because — just like the 19th century British imperialists — he holds the military and technological cards, and is well aware his counterpart lags miles behind in both sectors. He knows Europe doesn’t want to face Russian President Vladimir Putin without U.S. military back-up and cannot cope without American chip technology, so he feels he can dictate the trade agenda. EU Trade Commissioner Maroš Šefčovič strongly implied last month that the deal with the U.S. was a reflection of Europe’s strategic weakness, and its need for U.S. support. “It’s not only about … trade: It’s about security, it is about Ukraine, it is about current geopolitical volatility,” he explained. The trade deal is a “direct function of Europe’s weakness on the security front, that it cannot provide for its own military security and that it failed to invest, for 20 years, in its own security,” said Thorsten Benner, director at the Global Public Policy Institute in Berlin, who also pointed to failures to invest in “technological strength” and to deepen the single market.  Just like the Qing leadership, Europe also scorned the warning signs over many years. “We are paying the price for the fact we ignored the wake-up call we got during the first Trump administration — and we went back to sleep. And I hope that this is not what we are doing now,” Sabine Weyand, director-general for trade at the European Commission, told a panel at the European Forum Alpbach on Monday. She was speaking before Trump’s latest broadside on tech rules.   After its defeat by the British in the First Opium War, the Qing dynasty signed a treaty in 1842 that condemned China to more than a hundred years of foreign oppression and colonial control of trade policy. | History/Universal Images Group via Getty Images It is clear that Trump’s volatile tariff game is far from over, and the 27-nation bloc is bound to face further political affronts and unequal negotiating outcomes this fall. To prevent the humiliation from becoming entrenched, the EU faces a huge task to reduce its dependence on the U.S. — in defense, technology and finance. STORMY WATERS  The Treaty of Nanking, signed under duress aboard the HMS Cornwallis, a British warship anchored in the Yangtze River, obliged the Chinese to cede the territory of Hong Kong to British colonizers, pay them an indemnity, and agree to a “fair and reasonable” tariff. British merchants were authorized to trade at five “treaty ports” — with whomever they wanted.  The Opium War began what China came to lament as its “century of humiliation.” The British forced the Chinese to open up to the devastating opium trade to help London claw back the yawning silver deficit with China. It’s an era that still haunts the country and drives its strategic policymaking both at home and internationally. A key factor forcing the Qing dynasty to submit was its failure to invest in military and technological progress. Famously, China’s Qianlong Emperor told the British in 1793 China did not require the “barbarian manufactures” of other nations. While gunpowder and firearms were Chinese inventions, a lack of experimentation and innovation slowed their development — meaning Qing weapons were about 200 years behind British arms in design, manufacture and technology.   Similarly, the EU is now being punished for falling decades behind the U.S. Slashing defense spending after the Cold War kept European countries dependent on the U.S. military for security; complacency about technological developments means the EU now is behind its global rivals in almost all critical technologies. U.S. Trade Representative Jamieson Greer has, for his part, declared the beginning of a new world order — which he dubbed the “Turnberry system” — comparing the U.S.-EU trade accord to the post-war financial system devised at the New England resort of Bretton Woods in 1944.    TURBULENCE AHEAD  With his attack on Monday, Trump demonstrated scant regard for the EU’s desire to bracket out sensitive issues from last week’s non-binding joint statement. The vagueness of the four-page text, meanwhile, leaves room for him to press new demands or threaten retaliation if he deems that the EU is failing to keep its side of the bargain.  More humiliation could follow as the two sides try to work out details — from a tariff quota system on steel and aluminium to exemptions for certain sectors — that still need to be ironed out.   “This deal is so vague that there are so many points where conflicts could easily be escalated to then be used as justification for why other things will not follow through,” said Niclas Poitiers, a research fellow at the Bruegel think tank.    Asked what would happen if the EU were to fail to invest a pledged $600 billion in the U.S., Trump said earlier this month: “Well, then they pay tariffs of 35 percent.”  With his attack on Monday, Trump demonstrated scant regard for the EU’s desire to bracket out sensitive issues from last week’s non-binding joint statement. | Chip Somodevilla/Getty Images It’s a danger the EU is acutely aware of.  The European Commission argues the $600 billion simply reflects broad intentions from the corporate sector that cannot be enforced by bureaucrats in Brussels. But Trump could well use the investment pledge as a trigger point to gun for higher duties.   “We do expect further turbulence,” said a senior EU official, granted anonymity to speak candidly. But “we feel we have a very clear insurance policy,” they added.     What’s more, by accepting the agreement, sold by the EU executive as the “less bad” option following Trump’s tariff threats, Brussels has also shown that blackmail works. Beijing will be watching developments with interest — just as EU-China ties have hit a new low and Beijing’s dominance on the minerals the West needs for its green, digital and defense ambitions hand it immense geopolitical leverage.  ESCAPING IRRELEVANCE But what, if anything, can the bloc do to avoid prolonging its period of geopolitical weakness?  In the lead-up to the deal, von der Leyen repeatedly emphasized that the EU’s strategy in dealing with the U.S. should be built on three elements: readying retaliatory measures; diversifying trade partners; and strengthening the bloc’s single market.     For some, the EU needs to see the deal as a wake-up call to usher in deep change and boost the bloc’s competitiveness through institutional reform, as outlined last year in landmark reports penned by former European Central Bank head Mario Draghi and former Italian Prime Minister Enrico Letta.    In response to the deal, Draghi issued a strongly-worded warning that Trump’s evident ability to force the bloc into doing his bidding is conclusive proof that it faces irrelevance, or worse, if it can’t get its act together. He also played up the failings on security. “Europe is ill-equipped in a world where geo-economics, security, and stability of supply sources, rather than efficiency, inspire international trade relations,” he said.   Eamon Drumm, a research analyst at the German Marshall Fund, also took up that theme. “Europe needs to think of its business environment as a geopolitical asset to be reinforced,” he said.  To do so, investments in European infrastructure, demand and companies are needed, Drumm argued: “This means bringing down energy prices, better putting European savings to use for investment in European companies and completing capital markets integration.”   In comments to POLITICO, French Europe Minister Benjamin Haddad also called for “investing massively in AI, quantum computing and green technologies, and protecting our sovereign industries, as the Americans do not hesitate to do.”   FREE TRADE For others, the answer lies in deepening and diversifying the bloc’s trade ties — Brussels insists the publication of its trade deal with the Mercosur bloc of South American countries is just around the corner, and it is eyeing deals with Indonesia, India and others this year. It has also signaled openness to intensifying trade with the Asia-focused CPTPP bloc, which counts Canada, Japan, Mexico, Australia and others as members.    “In addition to modernizing the [World Trade Organization], the EU must indeed focus on continuing to build its network of trade agreements with reliable partners,” said Bernd Lange, a German Social Democrat who heads the European Parliament’s trade committee.   “To stabilize the rules-based trading system, we should find a common position with democratically constituted countries,” added Lange.   Europe, said Drumm, faces a choice.  “Is it going to reinforce its position as a hub of free trade in a world where globalization is unwinding?” he asked. “Or is it just going to be a battlefield on which increasing competition between China and the United States plays out?” 

BRUSSELS — Most thumbs were up. Some smiles were uneasy. And, in the middle of it all, the EU’s top trade official, Sabine Weyand, wore the kind of look that told the whole story: The bloc had gotten itself into a tricky spot. The photo, taken as the European Union and the United States sealed a fragile tariff truce at President Donald Trump’s Scottish golf resort on July 27, captured the discomfort on the European side over an agreement that was merely “the best it could get.” > President Trump's historic deal with the European Union reinforces our > strategic partnership with a key while expanding unprecedented market access > for American exporters. > > This colossal deal secures $750 billion in energy purchases and $600 billion > in investments, bolstering… pic.twitter.com/fcF2jdMP1f > > — United States Trade Representative (@USTradeRep) July 28, 2025 The two sides have finally firmed up Trump’s handshake deal with European Commission President Ursula von der Leyen into a joint statement that sets a 15 percent baseline U.S. tariff; promises a reduction in tariffs on European cars; caps levies on pharmaceuticals and semiconductors; and fully exempts EU exports of aircraft. Throughout, Europe has been engaged in a delicate dance with Trump — seeking to hold him to his trade promises while its leaders lobby him to commit to security guarantees for Ukraine against Russian aggression. “We’re still hostage to American military and strategic protection with a horribly neuralgic point, which is Ukraine,” said Pascal Lamy, a former EU trade commissioner. “And if we laid into Trump, which we have the economic capacity to do, he would have been able to say: ‘Well, if Europeans are enemies, now I don’t see why I should continue to help Ukraine.’ Nobody wants to take responsibility for that.” A less pressing, yet more awkward, task will be for Brussels to show the world it didn’t break the very rules of international trade that it helped to craft. After all, it has lectured Beijing, Washington and New Delhi for years on the importance of the World Trade Organization as an umpire of rules-based commerce. “We have completely sat on the rules that we helped to create, together with the Americans, and we will be accused of continuing to undermine them in the future if things continue as they are,” said Lamy, who after his stint in Brussels went on to helm the Geneva-based WTO between 2005 and 2013.  Von der Leyen’s admission at Trump’s Turnberry golf club that the EU had a “surplus” with the United States that the deal would help “rebalance” was the last nudge the Trump administration needed to declare victory and bury a system it had long seen as obsolete.  “By using a mix of tariffs and deals for foreign market access and investment, the United States has laid the foundation for a new global trading order,” Trump’s top trade negotiator Jamieson Greer wrote in a newspaper op-ed days after the agreement.  “[T]he Turnberry system is by no means complete, but its construction is well underway,” he added. CREDIBILITY CRUNCH The transatlantic trade accord, say leading trade authorities, risks undermining the very principles that Brussels has long championed at the WTO in a world increasingly shaped by no-holds-barred geopolitical confrontation. “It is going to be very difficult for the EU to say, ‘We are defending the multilateral trading system,’ because they are one of many members that decided to negotiate a bilateral deal with the United States,” said Marco Molina, a trade lawyer and a former senior diplomat who led talks on reforming the WTO’s dispute settlement body until 2024. The core problem of the deal is that it goes against the basic principles of the multilateral trading system: reciprocity and nondiscrimination.  Europe has been engaged in a delicate dance with Donald Trump — seeking to hold him to his trade promises while its leaders lobby him to commit to security guarantees for Ukraine against Russian aggression. | Pool Photo Annabelle Gordon via EPA For one, the two partners need to give each other roughly equivalent concessions — which the framework agreement currently hardly does. Nondiscrimination, set in the WTO’s most-favored nation rule, requires that any benefit granted to one trading partner needs to be immediately extended to all members — unless their agreement covers “substantially all trade.”  So while the EU has agreed to eliminate all tariffs on U.S. industrial goods and on cars, it has to do it under a full-blown trade accord. The Commission insists the agreement will eventually meet that bar.  Because most tariffs are set to be phased out over time, Brussels argues, the deal will ultimately respect the established rules of global trade. A senior Commission official told reporters on Thursday that the opening passage of the joint statement spelled out a “commitment for both sides to make an effort of progressive liberalization.”  They stressed it was “ongoing work that will also help us to meet the standards of the World Trade Organization rules around these issues.” On the record, the Commission’s commitment is unequivocal. “The European Union is and will remain a champion and supporter of WTO and rules-based trade — this will not change,” said Olof Gill, the Commission’s spokesperson for trade.  Yet even former Commission officials aren’t buying it. “The EU’s credibility as a linchpin of the WTO rules-based system would be seriously compromised if it decides to implement tariff reductions on a preferential basis,” said Ignacio García Bercero, who was the Commission’s point person for the transatlantic relationship and was responsible for its WTO policy until 2024.  This was met with enthusiasm from the leader of the bloc’s biggest economy, German Chancellor Friedrich Merz. | Filip Singer/EPA “There is zero credibility behind the argument that the EU-U.S. ‘deal’ is a step toward a WTO compatible [free-trade agreement],” added García Bercero, who is now a nonresident fellow at Brussels think tank Bruegel.  OUTBULLYING THE BULLY So what do you do when the biggest kid on the playground stops playing by the rules? For the EU, the response is increasingly: You don’t stand alone — you build a gang.   At first, Brussels resisted the idea of coordinating with other countries hit by Trump’s tariffs, such as Canada or Mexico. But it eventually changed course. “The main criticism that can be made against the Commission is that it did not seriously try to build an international anti-Trump coalition,” former WTO chief Lamy said.  That’s something that Brussels tried to fix in late June, when at a leaders’ summit, von der Leyen floated the idea of a new club in which the EU’s 27 countries would join forces with the members of the Pacific-focused Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, bloc, which counts the U.K., Canada, Japan, Mexico and Australia among its members. This was met with enthusiasm from the leader of the bloc’s biggest economy, German Chancellor Friedrich Merz. “If the WTO is as dysfunctional as it has been for years and apparently remains so, then we, who continue to consider free trade important, must come up with something else,” he told reporters.  Talks between EU and CPTPP negotiators are now expected later this year, with the goal of coordinating efforts to defend rules-based trade in the face of Trump’s tariff offensive, a top New Zealand finance official told POLITICO.  “The only way the EU can rebuild trust in the system is by coordinating with other members, beyond the U.S., to ensure WTO rules are respected,” said Molina, who now heads up his own law firm, Molina & Associates. “That will require leadership and teamwork — and the hope that Washington eventually realizes this trade war hurts American interests and consumers.”

BRUSSELS — Europe is getting fed up with Donald Trump’s trade threats — and is exploring a bold move to look east instead of west to find partners who want to play by the rules. Trump’s unilateral and arbitrary tariffs — which could ratchet up to 50 percent from July 9 if EU and U.S. negotiators fail to cut a trade deal — have tested EU chief executive Ursula von der Leyen’s patience and resolve. Her response? To team up with the CPTPP, a Pacific-centric trade group that includes like-minded nations such as Japan, Australia, Canada and Mexico. Between them, the 39 countries of the EU and (deep breath) Comprehensive and Progressive Agreement for Trans-Pacific Partnership account for 30 percent of world trade. Forming a coalition of the willing could, boosters argue, mark a first step toward reconfiguring the international trade order and escaping the institutional paralysis besetting the World Trade Organization. In a pitch to EU leaders, von der Leyen turned previous comments on possible cooperation with the CPTPP into more of a reality. The new grouping would redesign the rules of global trade, she said, reforming or perhaps even replacing the global trade rules body. Such a plan would “show to the world that free trade with a large number of countries is possible on a rules-based foundation,” von der Leyen said after an EU summit on Thursday night. “This is a project where I think we should really engage on, because CPTPP and the European Union is mighty.” MAKING THE PLEDGE But how could forming such a coalition of the willing work? One idea would be to make an up-front pledge to uphold the established rules of multilateral trade, veteran trade negotiators Tim Groser, Steve Verheul and John Clarke said in exclusive commentary shared with POLITICO. Groser, a former New Zealand trade minister; Verheul, previously Canada’s chief trade negotiator; and Clarke, until recently a senior EU trade negotiator, said the 39 EU and CPTPP countries should, in a first step, commit to a “Standstill Agreement” to keep their markets open to each other. “What it would do is send a massive signal to Washington that a very substantial part of the global economy, including nearly all the traditionally closest partners of the United States, remains committed to the rules-based system,” they said.  The U.S. had the chance to join the CPTPP, previously known as the Trans-Pacific Partnership, during the Barack Obama administration. But Trump withdrew in 2017, after taking office for the first time, before the pact could be finalized. When asked on Thursday if the U.S. would join the new initiative between the EU and CPTPP, von der Leyen replied, “As far as I understand, the Americans left at a certain point.” It would be up to the two blocs to decide if they want to let them in, she added.  Europe is getting fed up with Donald Trump’s trade threats — and is exploring a bold move to look east instead of west to find partners who want to play by the rules. | Shawn Thew/EPA Ignacio García Bercero, a former chief EU trade negotiator, believes that the potential partnership shouldn’t close the door to the Americans just yet, nor should it be seen as a move to antagonize Trump.   However, “if the U.S. is not ready to join because they don’t believe that the solution to these problems is rules, others are going to have to move ahead without the U.S.” YOU’VE GOT A FRIEND The United Kingdom has also spearheaded efforts as a newer CPTPP member to welcome the EU’s drive to strengthen ties between the two potential partners.  “I’ve been talking to the leaders in Japan, in Singapore, in Australia, New Zealand, Canada, about how we, the U.K., can trade in an easier, better way with them — whether we as a group of countries can trade with other countries in an easier and better way,” Prime Minister Keir Starmer said as he launched the U.K.’s first Trade Strategy since Brexit on Thursday.  Those countries are all members of the Asia-Pacific bloc, which the U.K. joined in December. Starmer’s government has been open to the idea of the bloc and EU teaming up. “I do think that it’s [a] difficult environment, but there are significant opportunities if we’re agile about it, if we understand the world we’re living in, and get ahead of the curve,” the prime minister told businesses during his Trade Strategy launch in Westminster.  If the EU and CPTPP can establish a new community of values and interests, that could serve as the basis to address trade challenges that have accumulated since the WTO was founded 30 years ago — but that it has been unable to resolve because the Geneva-based trade club works by consensus and its largest member, the U.S., won’t play ball. “This must start outside Geneva with a group of countries that can move more decisively,” argued Groser, Verheul and Clarke. “In the medium term, we contend that this grouping could be a focal point for developing new rules and commitments to a trading system that can deliver continued growth and prosperity to their people.” Von der Leyen is already courting the leaders of CPTPP countries, issuing a joint statement with Kiwi Prime Minister Christopher Luxon after their meeting this week in which both supported the launch of a dialogue between the EU and CPTPP “as soon as possible.” That echoed an appeal by CPTPP ministers meeting in Jeju, Korea, in mid-May. A meeting at ministerial level is planned in July, according to an EU official. “To be clear, the EU is not joining [the CPTPP] as such, but we are building bridges between the two blocs,” the official, speaking on condition of anonymity as is customary in Brussels, said before the EU summit.

BRUSSELS — Late at night, after a dinner of dumplings and duck legs, the European Union’s leadership excitedly revealed a new plan to combat the hell-raising American president’s trade war: Take him on at his own wild game. For six months, Donald Trump has upended the global trading order, threatening and announcing tariffs, then easing them to open negotiations, while warning that punitive levies will be reimposed if the terms are not to his liking. With just 13 days until the Trump-imposed deadline to conclude a EU-U.S. deal, European Commission President Ursula von der Leyen decided the time for conventional negotiating tactics was over. She floated the idea that the EU’s 27 countries could join forces with 12 members of the Asian-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership bloc (CPTPP) — which now includes the U.K. — to form a new world trade initiative.  The new grouping would redesign a rules-based global trading order, reforming or perhaps even replacing the now largely defunct World Trade Organization, she said. Crucially, the U.S. would not automatically be invited. Such a plan would “show to the world that free trade with a large number of countries is possible on a rules-based foundation,” von der Leyen said at the end of the EU leaders’ summit in Brussels in the early hours of Friday morning. “This is a project where I think we should really engage on, because CPTPP and the European Union is mighty.” Von der Leyen then explained that it would be up to the EU and the CPTPP to decide whether the U.S. would be allowed to join their project. “As far as I understand, the Americans left at a certain point.”  INNOVATIVE AND UNPREDICTABLE The idea of more formal cooperation with the Indo-Pacific group had already been floated in recent months by the EU executive as a way to counter Trump’s tariffs. But in case there was any doubt that such a gambit was firmly tied to fighting back against Trump’s disruption, another man called Donald dispelled it.  Polish Prime Minister Donald Tusk revealed the bloc had to be “very innovative … sometimes maybe unpredictable — as our friends from the other side of Atlantic.”  Poland currently holds the six-month rotating presidency of the Council of the EU. And Tusk, a former European Council president, is a veteran of Brexit negotiations, having chaired late-night summits in Brussels in an attempt to get a deal with the U.K. on its divorce from the bloc. He couldn’t resist crowing about giving Trump a taste of his own medicine. European Commission President Ursula von der Leyen decided the time for conventional negotiating tactics was over. | Oliver Hoslet/EPA “I think all of us are aware about this new method how to negotiate and how to talk about trade and other communications,” Tusk said, clearly referring to Trump’s disruptive tactics. The U.S. is one of Europe’s closest partners, he noted, “but we need to be similar to our partners in some sense.” Von der Leyen’s idea won public endorsement from Europe’s most powerful leader, German Chancellor Friedrich Merz. “If the WTO is as dysfunctional as it has been for years and apparently remains so, then we, who continue to consider free trade important, must come up with something else,” he said. But the truth is, von der Leyen’s proposal may ultimately prove only a temporary distraction from what threatens to be a major defeat, when an agreement with Trump is finally unveiled.  At the summit, European leaders grimly digested the news of a fresh proposal from the U.S. for further negotiations, POLITICO was first to reveal. PUNITIVE TARIFFS As they sat around the dinner table and accepted they won’t get a great agreement from Trump, they asked each other just how bad a deal they would be prepared to take to avoid the worst of his tariffs. Von der Leyen and her team are now expected to negotiate a sketchy outline of a contract in the next few days to meet Trump’s deadline of agreeing terms by July 9. After that date, he has threatened to ramp up punitive tariffs on EU goods to as high as 50 percent.  Only a month ago, EU countries were bullish about pushing Trump to back down in his trade war. They scorned the outline agreement the U.S. president struck with U.K. Prime Minister Keir Starmer, insisting the bloc was a trading superpower and would never accept Trump’s baseline 10 percent tariff.  Now, all that has changed. “It would be best to have the lowest tariff possible, 0 percent is the best,” said French President Emmanuel Macron. “But if it’s 10 percent, it’ll be 10 percent.” Lithuania’s President Gitanas Nausėda told POLITICO the EU can at most “hope to be treated like the United Kingdom” when it comes to a trade agreement with the U.S.  “It would probably be the best scenario,” Nausėda said. “But the United Kingdom, in the eyes of the United States, it’s a little bit different as a partner. And I hope we will be treated like the United Kingdom — but we will see.”  Diplomats said the question facing EU leaders was whether to go for a quick deal in the next two weeks or wait for a better one, even if it means a protracted trade war with the U.S.  “It would be best to have the lowest tariff possible, 0 percent is the best,” said French President Emmanuel Macron. | Oliver Matthys/EPA The risk in that situation would be that Trump then revisits his commitments to European defense, asking why Americans should pay to protect countries that are fighting them on trade, one diplomat said, speaking on condition of anonymity because the matter is sensitive.  Germany’s Merz was the strongest voice in favor of a rapid deal, even if it is only an outline. “We now have less than two weeks until July 9. And you can’t agree a sophisticated trade agreement there,” he said. Industries from chemicals, to steel, to car-making are already suffering, he said, putting companies at risk. “Please let’s find a solution quickly.” Hans von der Burchard, Jacopo Barigazzi, Yurii Stasiuk, Ben Munster, Gregorio Sorgi, Hugo Murphy, Louise Guillot, Nicholas Vinocur, Sarah Wheaton, Max Griera and Alexander Varbanov contributed reporting.

LONDON — In a world blighted by tariffs and increasing protectionism, U.K. Prime Minister Keir Starmer is starting to realize that teamwork really is the only way to make his free trade dream a reality. “I do think that it’s [a] difficult environment, but there are significant opportunities if we’re agile about it, if we understand the world we’re living in, and get ahead of the curve,” Starmer told businesses in Westminster on Thursday as he set out the U.K.’s first Trade Strategy since Brexit. While underscoring the importance of trade deals with the likes of India and the U.S., Starmer hinted at a more multilateral approach to trade policy. “I think we should also talk to like-minded countries, because they recognize that the world is changing,” he said. “I’ve been talking to the leaders in Japan, in Singapore, in Australia, New Zealand, Canada, about how we, the U.K., can trade in an easier and better way with them and whether we as a group of countries can trade with other countries in an easier and better way.” The countries mentioned are all members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an Asia-Pacific trading bloc which the U.K. joined in December. ASIA-PACIFIC BLOC ‘MORE IMPORTANT THAN EVER’ Starmer’s words were borne out in the government’s new trade strategy, where the U.K. committed to working alongside partners and allies to negotiate and agree an “ambitious agenda for future plurilateral agreements.” It describes the role of groupings such as CPTPP as “more important than ever in the current global context.” “We will use CPTPP as a platform to support the wider multilateral and plurilateral system, and to encourage deeper trading relationships between countries and groupings committed to liberal rules-based trade,” the strategy said. At a recent meeting in Korea, CPTPP members committed to work with the EU and the Association of Southeast Asian Nations — a regional grouping of 10 states in Southeast Asia — to liberalize global trade in light of “significant challenges” facing the international trading environment.   This could include discussions on areas such as tariffs, digital trade, rules of origin, supply chains, customs administration and innovation, the Trade Strategy said, adding that these dialogues could “create a platform for other trade-focused economies to participate, so broadening our network of collaborative partnerships.” In another sign of the U.K.’s commitment to a multilateral trading system, the U.K. announced it would join the World Trade Organization’s Multi-Party Interim Appeal Arbitration Arrangement (MPIA), an alternative system for resolving WTO disputes. The U.K. had previously dragged its heels on signing up to the mechanism. “Joining MPIA sends a clear signal that the U.K. is committed to the principles of free and fair trade and that we will champion progress wherever and whenever necessary,” the strategy said.

Canada has agreed to ratify Britain’s accession to a massive Pacific-rim trade pact, allowing the two countries to trade under its terms as they push for closer commerce ties amid Washington’s tariff war. The breakthrough concerning the U.K.’s membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came after a private late-night dinner between Prime Minister Keir Starmer and his Canadian counterpart Mark Carney on the sidelines of the G7 summit in the Canadian Rockies.  Canada plans to introduce the legislation to the Ottawa parliament this fall. The two sides also agreed to launch a joint task force to make progress on areas including technology and artificial intelligence. A Downing Street spokesperson said: “The Prime Minister said that the world has changed when it comes to trade and the economy, so he wants teams to go as far and as fast as possible.”  The task force will also look to make progress on the wider UK-Canada Free Trade Agreement, although a U.K. official told POLITICO “it’s more of a staging post toward relaunch and whether we think it’s possible to get there within our red lines.” While the U.K. was already a member of the CPTPP — the world’s fourth-largest free-trade pact, whose members had a combined $15.8 trillion in GDP in 2024 — Canada had refused to ratify its membership, preventing Ottawa and London from trading under its rules. Talks between the two sides broke down in January 2024 under the previous U.K. government amid clashes over hormone-fed beef. The breakdown shut British cheesemakers out of the Canadian market and hit U.K. carmakers with an extra 6 percent tariff when the U.K.’s post-Brexit rollover deal expired.  A Downing Street spokesperson said: “The Prime Minister said that the world has changed when it comes to trade and the economy, so he wants teams to go as far and as fast as possible.” | Andy Rain/EPA Canadian Ambassador to the U.K. Ralph Goodale previously said that Britain’s distaste for hormone-treated beef is “not scientifically justified” and that he doesn’t foresee its “easily being solved” in talks.  Canada’s International Trade Minister Maninder Sidhu told POLITICO that “Canada has always remained at the negotiating table and we welcome the U.K.’s openness to resume talks.” “We look forward to continued collaboration on advancing a modern and ambitious FTA that delivers real benefits for workers, businesses and consumers in both countries.” 

BRUSSELS — Donald Trump is turning his back on free trade and, with it, the €1.6 trillion transatlantic trade relationship. That’s motivating the European Union to do trade deals with just about everyone else. The United States accounts for 13 percent of world trade. The EU, the world’s largest single market spanning 27 nations and 450 million people, accounts for around 16 percent — and is looking to extend its lead. “Countries are lining up to work with us,” European Commission President Ursula von der Leyen has told POLITICO. Since her second Commission was confirmed in December, von der Leyen has wrapped up talks on a long-awaited accord with the Latin American Mercosur bloc; called to strike a free-trade agreement with India this year; and launched or relaunched talks with the Philippines, Malaysia, Thailand, the United Arab Emirates and others. Here’s a rundown of the deals that Brussels wants to get done: MERCOSUR Why does it matter? Within a week of her second Commission being sworn in last December, von der Leyen flew to Montevideo, Uruguay, to shake hands with the leaders of the Mercosur countries — Argentina, Brazil, Paraguay and Uruguay — on a deal that would create a market of more than 700 million consumers on both sides of the Atlantic. What’s holding it back? European farmers, especially in France, still furiously oppose the deal, which has been in the works for a quarter century, fearing competition from cheap South American imports. France’s political leaders have taken a stand against the Mercosur deal, and there is opposition in Poland, Belgium and Ireland as well. The farmers refuse to be placated, even though the deal sets low import quotas on items such as beef, poultry and sugar. Then there’s the issue of deforestation, specifically in the case of Brazil, where some worry that companies may try to circumvent the EU Deforestation Regulation (EUDR). Chances of it happening anytime soon? Trump’s all-out trade war has turned the tide on the Mercosur debate, leading some previously skeptical countries — like Austria — to shift toward the pro-deal camp. Even France appears to be wavering, with trade minister Laurent Saint-Martin telling POLITICO that Trump’s trade war is “a wake-up call on trade agreements.” Still, he maintains, the Mercosur agreement is unacceptable in its current form.  A window of opportunity would open after the May 18 presidential election in Poland — which currently holds the rotating presidency of the Council of the EU. A vote in the Council would take place in either September or October, on Denmark’s watch, with the final signature expected by year’s end. Deal-o-meter rating: ⭐️⭐️⭐️⭐️★ INDIA Why does it matter? Von der Leyen flew to India in February with her new College of Commissioners to pitch an FTA that she called “the largest deal of this kind anywhere in the world.” A trade accord would forge a common market of nearly 2 billion people, tying India closer to its biggest trading partner, the EU. With India on track to become the world’s third-largest economy by the end of the decade, it’s no surprise that von der Leyen has put getting the deal over the line this year at the center of her diversification agenda. What’s holding it back? If the past teaches us anything, it’s that the EU must be clinical in its pursuit of an FTA with India. In 2013, a deal collapsed after six years and 15 rounds of talks, amid European frustration about market access in sectors ranging from cars to liquor. Fast forward to 2021, and the long-stalled talks were ignited once again into a three-part trade deal in the hope of solving issues such as India’s high duties on imported cars. Prime Minister Narendra Modi’s main man in the talks, Commerce Minister Piyush Goyal, has earned a reputation as the world’s toughest trade negotiator. Another sensitive issue for New Delhi is the EU’s planned carbon border tax, with Goyal threatening a retaliatory levy that, he says, would sound “the death knell of manufacturing in Europe.” Chances of it happening anytime soon? Both von der Leyen and Modi have made it clear they want to get the deal done this year — a bold ambition if experience teaches us anything. Still, with Trump also pressing India to open up its market, New Delhi is seeking less coercive and more consensual trading relationships. Modi will also want to play Washington and Brussels off against each other to get the best deal. Goyal is due in Brussels on May 1-2 for his second visit of 2025, ahead of another round of formal talks from May 12-16 in New Delhi. Deal-o-meter rating: ⭐️⭐️⭐️★★ AUSTRALIA  Why does it matter? Negotiations between Australia and the EU were launched in 2018, with 15 rounds held thus far. Reaching a deal would increase the bloc’s GDP by an estimated €4 billion. The EU ranks as Australia’s third-largest trading partner in goods, ahead of the U.S., and second in services. However, Brussels remains at a disadvantage when it comes to trading with Down Under, as competitors like Japan and the United Kingdom enjoy preferential access through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Securing a deal would not only open up market access for European exports of cars and machinery, but also help the EU reduce its dependency on China for critical raw materials —  Australia being rich in deposits of minerals such as lithium and cobalt, as well as rare earth metals.  What’s holding it back? Beef and sheep meat. Talks collapsed just before the finish line in October 2023, when Australian Trade Minister Don Farrell walked away complaining of a lack of access to the EU market. The European Commission complained at the time that the Australian side had re-tabled agricultural demands that, it said, “did not reflect recent negotiations and the progress made between senior officials.” Australian farmers still want greater access to the EU market, but the Commission’s trade negotiators have little room to maneuver with Europe’s own farming lobby hostile to freer trade. Another sticking point is geographical indications (GIs), under which Australian producers would lose naming rights on products like Prosecco, Feta and Parmigiano Reggiano. Chances of it happening anytime soon? Australia’s May 3 general election — which is likely to return a government led by incumbent Prime Minister Anthony Albanese — could fire the starting gun on a new negotiating push. Farrell, the man who killed the EU deal in 2023, now says “the world has changed” following Trump’s tariff offensive. Even Australian farmers are saying that if the EU wants to live up to its role as a leader in trade, it needs to walk the walk and get the deal across the line. Farrell spoke earlier this month with Maroš Šefčovič, the EU’s chief trade negotiator, and says the two have agreed to meet up soon after the election. Deal-o-meter rating: ⭐️⭐️⭐️⭐️★ INDONESIA Why does it matter? Indonesia is the largest economy in the Association of Southeast Asian Nations (ASEAN) — a regional trade community — and the world’s fourth-most-populous nation. Its trading relationship with the EU pales by comparison. The EU is its fifth-largest trading partner, but Indonesia, despite its size, doesn’t even rank in the EU’s top 30. That spells untapped potential. What’s holding it back? Talks over the past decade have been bumpy, to say the least, with disputes repeatedly ending up before the World Trade Organization. Jakarta had hoped to wrap talks before its new government took power in October, but that proved too ambitious. The bloc wants Indonesia’s nickel ore for its steel and automotive industries, but Indonesia has banned exports — which the EU has successfully challenged at the WTO. Jakarta also seeks more latitude under the EUDR — which seeks to prevent forest land being cleared for cultivation and would impact its palm oil industry. The EU won’t budge.  Chances of it happening anytime soon? After an inconclusive 19th round last July, no 20th round has yet been penciled in. The sheer number of rounds held shows how drawn-out the process has become, with a landing zone for a deal eluding negotiators for almost a decade now. Deal-o-meter rating: ⭐️⭐️★★★ SOUTHEAST ASIA (PHILIPPINES, MALAYSIA, THAILAND) Why does it matter? The EU is also ramping up efforts to strengthen ties with other ASEAN nations — resuming stalled trade talks with Malaysia, Thailand and the Philippines. All count the EU among their top trading partners. The push comes as the bloc looks to catch up with rivals like China and the U.S. in the region.  With a market of over 660 million consumers, the 10-nation ASEAN is the EU’s third-largest trading partner outside Europe after the U.S. and China. Malaysia is also a member of the CPTPP, which could strengthen the EU’s drive to pursue membership, given that the U.K. is already a member of the trade alliance.  What’s holding it back? Disagreements over Malaysia’s palm oil industry, the second-largest in the world, led the two sides to put the deal on hold in 2013 — as with Indonesia, the EUDR became a sticking point along with concerns over sustainable practices.  In the case of the Philippines, concerns over previous Prime Minister Rodrigo Duterte’s human rights violations and hostility toward the West put an end to talks — which resumed in 2023 after Duterte stepped down. Similarly, a military coup in Thailand in 2014 led the EU to put discussions on hold. Chances of it happening anytime soon? Malaysian Prime Minister Anwar Ibrahim visited Brussels in January to push for a deal. Brussels expects a first round of negotiations to take place either before summer or later in 2025. Malaysia’s trade minister, Tengku Zafrul, expects talks to conclude next year. FTA talks with both the Philippines and Thailand are progressing, with the next rounds set for June — Brussels will host talks with the Philippines, while an EU delegation will head to Bangkok for the Thai negotiations. Several chapters in each negotiation have already been provisionally agreed. Deal-o-meter rating: ⭐️⭐️⭐️★★ Koen Verhelst contributed reporting.

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.

LONDON — As Donald Trump and Xi Jinping square off for a tariff war in 2025, Britain is seeking shelter in a growing trade bloc in the Indo-Pacific. At a minute past midnight on Sunday morning, the U.K. became the first new member to join the tongue-twisting Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) since it was formed in 2018. It’s also the first country that doesn’t at least have a coast fronting the region. Joining the bloc might not do much to advance Prime Minister Keir Starmer’s growth agenda back home — at least not in the short term. But as trade rules fragment and two of the U.K.’s largest economic partners prepare to butt heads, it’s the perfect time for the country to join, say trade experts and senior officials from member nations. The U.K. now gets to shape the future of a 12-member bloc — featuring some of the fastest-growing Asian economies — which globalists see as one of the last places the rules embodied by the beleaguered World Trade Organization remain sacrosanct. China and Taiwan’s applications to join have loomed large. Yet the U.K. is seen by other members as a reliable bulwark against Beijing, as the deal is upgraded by consensus in the coming years to toughen its approach to state-owned enterprises. “When the U.K. applied during the first Trump presidency it was already apparent that the international trade order was becoming more fragmented,” said John Alty, a former top civil servant at Britain’s trade department. That fragmentation has “continued since then, if not accelerated,” Alty said, with Trump insisting he will slap tariffs on U.S. allies and China alike when he sweeps into the White House. Concern is growing global trade “will get even rougher,” Alty added, arguing that joining the bloc “was a good move to make” post-Brexit. BUCCANEERING GLOBAL BRITAIN When then-Trade Secretary Liz Truss filed the U.K.’s application to join in early 2021, marking one year since leaving the EU, she promised joining CPTPP would “create enormous opportunities for U.K. businesses that simply weren’t there as part of the EU.” Under Prime Minister Boris Johnson, the Tories promised to return buccaneering Global Britain to its place at the forefront of global trade which it last occupied in the early 20th century. The opposition Conservative party still advances this view. Shadow Business Secretary Andrew Griffith said last week that Britain’s entry into CPTPP “along with trade with the U.S., is the path to prosperity, not realignment with the EU.” Trade Policy Minister Douglas Alexander said better access to new markets can benefit British businesses. | Fabrice Coffrini/AFP via Getty Images But British firms have long scoffed at the hype. The Department for Business and Trade says the deal will unlock a £2 billion annual boost to U.K. GDP but not until 2040. A 2021 analysis — produced before the terms of the deal were finalized — predicted a meager 0.08 percent bump to the U.K.’s domestic GDP, mainly because Britain already has trade deals with most of the other members. Meanwhile, the government’s budget watchdog’s modeling consistently shows Brexit will drag U.K. trade down by 15 percent — delivering a 4 percent hit to the U.K.’s economic productivity — in the long term. With Labour now in power, Starmer has prioritized mending ties with the EU and trade “won’t be driven by post-imperial delusions or political dogma,” said Trade Policy Minister Douglas Alexander last summer. Yet Labour sees big opportunity in the Indo-Pacific pact. “We have this twin-track approach to trade,” said a Department for Business and Trade official, granted anonymity to speak freely. That means, they said, securing trade deals with CPTPP and others “at the same time as resetting our relationship with the EU.” PLAN B, CPTPP It’s a Global Britain outlook minus the anti-EU ideology. Having left the EU and with Trump and China squaring off, Britain can use all the friends it can get. Over several days in Vancouver late last month, Alexander joined the bloc’s trade ministers from Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand Peru, Singapore and Vietnam as they held their annual meeting. He was among those who voted to put China and Taiwan’s controversial applications on the back burner and nominated Costa Rica to be next in line to join. The bloc “will grow” opening up new opportunities, insisted Crawford Falconer, the outgoing Whitehall official who devised joining as he architected the U.K.’s post-Brexit trade agenda. | Ross Setford/Getty Images As the bloc “expands,” Alexander said, “U.K. businesses could gain greater benefits and better access to new markets around the world, contributing to this government’s core mission of driving economic growth across the country.” Indonesia, with its rapidly growing economy, applied to join in September following bids from Ukraine, Ecuador and Uruguay. Thailand and South Korea are also lining up. Membership will become more valuable as new nations join, internal government analysis first reported by POLITICO shows. Britain’s agriculture and food sectors will bear the brunt of the downside. Manufacturers and Britain’s powerful services sector, including banks, insurance, and consulting firms stand to benefit most. The bloc “will grow” opening up new opportunities, insisted Crawford Falconer, the outgoing Whitehall official who devised joining as he architected the U.K.’s post-Brexit trade agenda, during a lecture at the London School of Economics in March 2023. When it comes to the faltering WTO — after Trump crippled its trade dispute court in 2017 —  “you’ve got to have a Plan B. And what is Plan B? Well, I mentioned CPTPP,” he said. NEW FRIENDS, OLD FRIENDS While the deal’s champions like Falconer and Prime Ministers Boris Johnson, Truss and Rishi Sunak fade from power, there’s a “political consensus” around joining that gives firms “security,” the DBT official said. Arguments between Britain’s Brexiteers and EU rejoiners that the deal will block the U.K. from getting closer to the EU are a “non-issue,” Alty said. Arguments between Britain’s Brexiteers and EU rejoiners that the deal will block the U.K. from getting closer to the EU are a “non-issue,” John Alty said. | Dan Kitwood/Getty Images “Nobody sensible sees this as some sort of alternative to membership of the EU or a sort of replacement for that,” the former official, who now works as a consultant at Pagefield, said. Membership is “a sensible way to strengthen your trading environment and relationships with some important parts of the world,” Alty insisted. But joining also has the U.K. stepping into a geopolitical balancing act as Starmer works to rekindle relations with China while Trump threatens to clamp down on Beijing. Labour will face pressure from U.K. allies to continue blocking China’s CPTPP bid. “I do not want to lower the level of qualification requirements for China to join,” said Kunihiko Miyake, a former Japanese diplomat, research director of the Canon Institute for Global Studies and special adviser to Tokyo on foreign policy. “We made a similar mistake when we allowed China to join the WTO.” This year Canada chaired the Indo-Pacific bloc and led efforts to modernize and tighten its rules, making the bar higher for members with non-market economies like Vietnam and aspirants like China queuing to join. But joining also has the U.K. stepping into a geopolitical balancing act as Keir Starmer works to rekindle relations with China while Donald Trump threatens to clamp down on Beijing. | Pool photo by Florence Lo/AFP via Getty Images It was one of the biggest issues Alexander and his new colleagues grappled with in Vancouver, said a senior official from a CPTPP member nation granted anonymity to speak freely. “There’s been a lot of work that’s been done on that,” they said. In battening the economic hatches against China, Trump and fragmenting global trade, Alty said, “it’s valuable to have genuine coalitions of the willing.” Emilio Casalicchio contributed to this report.