The second presidency of Donald Trump, which will be inaugurated in a few days, poses significant challenges for the European Union (EU), particularly in terms of trade. In her latest study, Nathalie Dezeure, Head of Macro & Financial Institutions Research, considers the EU in a favorable position to negotiate with the United States (as well as with China) on trade issues.
Indeed, given the importance of trade between the two regions, deteriorated trade relations would be detrimental for both, but likely more for the United States than for the EU, especially for the manufactured goods sector. The United States relies on the European Union for 18.3% for its trade in goods, compared to 6.7% for the EU. An analysis of value-added trade somewhat mitigates this data, depending on the sectors.
The EU is in a favorable position to negotiate with the United States - as well as with China - on trade issues. By establishing a common response to unilateral (aggressive) measures; maintaining continuity in dialogue; and, in the long term, focusing on economic resilience.
Nathalie Dezeure
A position of strength
In the short term, in the face of potential or real American threats, the EU's ability to speak with one voice on the global stage places it in a strong position regarding international trade. The EU currently has various deterrence mechanisms to defend its interests and bring the United States to the negotiation table, thus avoiding an escalation of coercive measures.
This framework has been strengthened over the past two years with instruments such as the Anti-Coercion Instrument (ACI), the Foreign Subsidies Regulation (FSR), and the International Procurement Instrument (IPI). If negotiations fail, an emergency aid plan will be necessary to support vulnerable sectors and contribute to the economic resilience of the EU.
Building economic resilience
In the long term, a strategic response to more conflictual transatlantic relations appears necessary, as well as the revival of the competitiveness of the European single market through an integrated industrial policy and, finally, a diversification of trade to reduce dependence on the United States and China.
With a market of 450 million inhabitants, rapidly growing trade, and a network of trade agreements that has strengthened in recent years, the EU seems capable of providing a firm response to the United States, while maintaining a resilient relationship. The main risk may well come from the EU itself, with some member states showing a desire for restraint in their response.
