Saint-Etienne, Christian, and Roland Gillet. “L’Union européenne peut-elle rester passive face aux menaces commerciales de Donald Trump?” Le Figaro, FigaroVox/Tribune, 24 January 2025. English Version
Can the European Union Remain Passive in the Face of Donald Trump's Trade Threats ?
By Christian Saint-Etienne and Roland Gillet
Published January 24th, 2025
Donald Trump’s presidency ushers in a new era of trade conflict, mirroring the patterns of his previous term. Professors Christian Saint-Etienne and Roland Gillet argue that if the European Union continues to adhere unilaterally to free trade principles, it risks significant economic repercussions.
Donald Trump's election was largely driven by a promise to restore American prosperity. While American living standards now surpass those in Europe, a significant portion of the population (around 25%) faces economic hardship, unlike the smaller proportion (one-seventh) in Europe. This disparity is partly attributable to Europe's more redistributive social model. Trump intends to massively invest in American industry, building upon Biden’s policies such as the Chips Act and the Inflation Reduction Act (IRA), which aimed to boost domestic production of microprocessors and green technologies. It is highly probable that Trump will continue these industrial policies, albeit under different names.
American middle-class voters, facing high inflation under Biden and Harris, expect Trump to quickly improve their living standards. Trump's campaign focused on criticisms of Biden and Harris' handling of inflation, immigration, and what he termed "wokeness," promising to curb inflation and deport millions of immigrants, many of whom work in low-wage sectors, potentially driving up production costs.
Furthermore, Trump's planned trade war, extending even to allies, will likely increase import costs and, consequently, domestic production costs. This dual strategy—restricting immigration and imports—could accelerate inflation and raise interest rates, potentially hindering economic activity. The Federal Reserve's current low-interest-rate policy might prove unsustainable should inflation resurface.
Trump's commitment to improving American purchasing power could prove difficult to achieve if inflation rises. This could backfire, particularly if increased tariffs are imposed before the 2026 elections. His past tendency to moderate or abandon campaign promises suggests this is a real possibility.
The EU-China trade relationship, marked by a lack of reciprocity, also poses a significant challenge. While China has enjoyed access to European public markets for 25 years, European access to Chinese markets has remained limited. Moreover, China's substantial subsidies for exporting firms have elicited an insufficient response from the European Commission.
The intensifying trade conflicts will undoubtedly pressure European authorities and businesses. A proactive and coherent strategy is essential to prevent a major economic and political crisis. The EU's current passivity leaves it vulnerable to significant economic disruption, particularly as China might redirect its exports to Europe if access to the US market diminishes. The authors conclude by advocating for a more assertive and proactive European approach to global trade.
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