• Europe reluctance to take hard line on China looms as irritant
  • Tariff hikes, countermeasures on Europe digital taxes in play

Donald Trump is targeting the European Union for a potential slew of punitive trade measures designed to address long-standing grievances should he retake office, according to people familiar with his team’s nascent economic-platform discussions.

The two sides are still at odds over tariff increases Trump imposed in his first term as president on steel and aluminum, which were partly suspended in 2021 after President Joe Biden took office. If Trump wins in November, the EU undoubtedly will be one of his chief targets on trade, according to conversations with several Trump advisers.

A likely starting point in a second Trump administration would be the EU’s inclusion in a broad minimum 10% tariff, which would also be applied to China, his allies said. He might also assemble counter-measures against European digital services taxes that implicitly go after US technology champions, using Section 301 of the US trade law, the allies added.

Trump supporters cited a variety of motivations for the plans. Among them: frustration that the EU has been reluctant to take a more aggressive approach with regard to China, in terms of its own duties on Beijing and restrictions on strategic investments by Chinese companies.

The potential measures against Europe also would serve as a major component of a broader initiative to overhaul US trade in goods. The nation has had long-standing, large deficits with the EU, with 2023 data on track to mark a third straight year of an imbalance exceeding $200 billion — a pattern Trump advisers argue is an illustration of unfair trade practices.

“Trump uses trade and tariffs as a negotiating tactic to get these countries to act in the interest of the US — you saw that with NATO,” said Stephen Moore, one of Trump’s informal economic advisers. He was referring to the way Trump in his first term had demanded that NATO allies contribute more money for defense.

Moore, a fellow at the Heritage Foundation, said that “a lot would depend on how Europe would act in terms of lowering their tariffs against US products.” With the average European country levying a value-added tax of 15% to 20%, “that puts us at a trade disadvantage right at the start,” he said. Trade experts say such duties give European companies an incentive to direct their goods to the US, which lacks a national sales tax.

The 10% baseline tariff isn’t entirely conceived of as a tit-for-tat measure, but also a policy to bolster the long-term global manufacturing position of the US, according to a Trump campaign official. It would spur billions of dollars of revenue that would give Washington space to cut taxes on domestic producers and others, the official said.

Overseas officials have been bracing for Trump 2.0, and frantically trying to uncover his specific plans, according to several Washington-based lobbyists.

Steven Cheung, a spokesman for the Trump campaign, said the former president “has made clear that he intends to use every tool at his disposal to defend American workers. Whether they are autoworkers, steelworkers, technology workers, or farmers, he will not stand for other countries stealing our jobs or targeting our industries for destruction.”

The last time Trump was in office, the EU was able to head off what had loomed as a worst-case scenario for trans-Atlantic commercial ties: a trade war over autos. Washington lawmakers — primarily Republicans — and the American business community, with its swath of lobbyists, served as a last line of defense preventing that outcome.

Different Washington

This time around, Brussels might not get so lucky. Among the challenges: many of Trump’s critics on Capitol Hill are gone, like the moderate Republican lawmakers who oversaw key committees and tried to slow-walk his policies.

Trump has had three years out of office to think about his approach if he wins this November, and is likely to move quickly. In addition to the broad 10% tariff idea, Trump has talked with advisers about banning TikTok Inc. from the US and keeping out electric cars manufactured in China, or made with Chinese parts and then assembled in other countries, such as in Europe or Mexico.

Since he was last in the White House, the EU has itself taken some measures against China, including the launch last year of an investigation into Chinese state support for electric vehicles. Still, decisions like Germany’s move to clear a stake sale in a Hamburg port terminal to a Chinese state firm showcases differing perspectives with the US.

Transatlantic ties have improved notably since Biden took office, though his administration hasn’t been able to unwind all of the trade actions taken by his predecessor. After two years of talks without a solution to the dispute over steel and aluminum products, the two sides in 2023 decided to punt until after the presidential election.

Lighthizer Role

That dispute resulted in billions of dollars in retaliatory tariffs by the EU, targeting American iconic products like Harley Davidson motorcycles and Kentucky bourbon.

Robert Lighthizer, who advocated for tariff increases as US trade representative in Trump’s administration, continues to closely advise him on trade. He lives in Florida near Trump’s Mar-a-Lago resort, giving him proximity to the former president during the winter months. Lighthizer has told associates he doesn’t want to serve again as the US Trade Representative, but some Trump allies have suggested he could make a strong White House chief of staff or Treasury secretary. Lighthizer declined to comment.

Along with Lighthizer and Moore, Trump also receives advice on trade and economics more broadly from Larry Kudlow, his former director of the National Economic Council; the conservative economist Art Laffer; and Kevin Hassett, who ran the Council of Economic Advisers in the Trump White House. He also stays in touch with a number of long-time friends and businessmen, who inform his thinking on the economy.

Something that gives the Trump team encouragement about tariff use is the EU’s current challenge from soaring imports of Chinese electric vehicles. China’s EV makers have had less success in the US, where they face a 25% levy dating from Trump’s first term.

Tech Firms

The Trump team also intends to work to shield American companies from what they see as overreach on the part of Europeans on regulation and digital taxes.

While tech giants like Google owner Alphabet Inc., Meta Platforms Inc., Microsoft Corp., Amazon.com Inc., Apple Inc. and Netflix Inc. may have battalions of employees hostile to Trump and his fellow Republicans, Trump considers the companies born-and-bred in the US, and consequently would like to protect them, said former Trump aides.

That could be done by assembling counter-measures to European digital services taxes — which largely target the big US firms — by using Section 301 of the US trade law, Trump allies said.

“The European Union does what it can to cripple American companies. He would be pretty inclined to stand up for us,” said Trump ally and former House Speaker Newt Gingrich. “I do know he values tariffs because they give him negotiating leverage.”

Written by:  and  @Bloomberg

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