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Newly re-elected US President Donald Trump will likely implement “broad and aggressive” measures targeting the European Union’s trade surplus with the country during his second term in the White House, according to a former senior US trade official.
Greta Peisch, former General Counsel of the Office of the United States Trade Representative (USTR), told Euractiv that Trump’s policies will probably be of a similar “level of ambition” to the 60% tariffs on Chinese goods and 10-20% duties on all other US imports proposed during his re-election campaign.
“I think Trump is going to take broad and aggressive action on trade,” Peisch said.
Peisch, who stepped down from her position at the USTR in January and currently works for Wiley, a DC-based law firm, said that one of the incoming Trump administration’s main priorities will be to address Washington’s considerable trade deficit with the rest of the world – including the EU.
The EU ran a surplus of goods of €157.9 billion last year: €37.2 billion more than when Trump first took office in 2017.
Peisch herself saw trade balances between the two jurisdictions as problematic.
“We’re importing autos from the EU. We’re not exporting any. We’re importing steel from the EU. We’re not exporting any […] There’s a perception that there is something unfair about this trade relationship that should be corrected,” she claimed.
In terms of specific policies, Peisch suggested that the former real estate mogul could be tempted to re-impose tariffs on EU steel and aluminium, which were introduced during Trump’s first term but wavered under outgoing President Joe Biden.
She also noted that Trump might introduce retaliatory duties that were originally announced – but immediately suspended – by the USTR in 2021 following a “Section 301” investigation into the EU’s taxation of US tech firms including Amazon, Apple, and Google.
“There is a big, bipartisan concern in the United States related to the taxation of US digital companies,” Peisch said, describing those measures as “discriminatory.”
“And I think that could certainly be a vehicle that the Trump administration looks at to highlight” domestic worries, she said, “and potentially impose tariffs – and do it pretty quickly – on the EU.”
Fears of Lighthizer
The former government official also believed that Trump’s trade strategy will once again be heavily influenced by Robert Lighthizer, a fervent protectionism advocate who oversaw US trade policy during Trump’s first term.
Having had a “front row seat” to changes in US trade policy while working for Senator Ron Wyden on the Senate Finance Committee during the first Trump term, Peisch said it is “very likely” that Lighthizer will be “highly influential” in the next administration.
“Ambassador Lighthizer really moved ‘the Overton window’ on trade policy – and that influenced the Biden administration and US bipartisan thinking,” she said.
EU leaders’ fears about Washington’s future trade plans have been compounded by last week’s reports that Lighthizer will likely return to the White House – and could potentially assume his previous role as US Trade Representative.
In a recent op-ed in the Financial Times, Lighthizer vehemently defended the use of tariffs to protect the US against economic “predators” that “consistently” run large surpluses.
“Countries that run consistently large surpluses are the protectionists in the global economy,” he wrote. “Others, like the US, that run perennial huge trade deficits are the victims.”
Changed paradigm
Overall, Peisch stressed that EU leaders must ultimately recognise that increasing geopolitical tensions – and growing economic competition from China – mean that Washington’s trade policy has undergone a fundamental shift in recent years.
“There’s… a sense in which the EU was just holding tight for the [first] Trump administration to be over, and were thinking that they would snap back to an Obama-era trade policy and approach with the Biden administration,” she said.
“And that just did not happen. And so I think they have to recognize that Trump was elected by the people of the United States – and this reflects a perspective on trade that is growing in the United States and is not an aberration.”
Her comments come amid mounting fears about the impact on the EU economy of what analysts have often pointed to as growing US protectionism – at a time when Europe is already reeling from a combination of high energy prices, low investment, and weak domestic and external demand.
In its Autumn Economic Forecast published last Friday (15 November), the European Commission downgraded its expected 2024 GDP growth for the EU to 0.9%.
In a sign of Washington and Brussels’ contrasting economic fortunes, the EU executive also upgraded its predicted growth rate for the US, from 2.4% to 2.7%.
The Commission noted the EU’s economic outlook is “largely tilted to the downside”, amid the two ongoing conflicts in Ukraine and the Middle East as well as potential “protectionist measures by trading partners”.
EU economy commissioner Paolo Gentiloni told reporters on Friday that “a possible protectionist turn in US trade policy would be extremely harmful to both economies.”
“The trade relationship between the United States and the European Union is one of the world’s largest and most strategically significant,” he added.
In an apparent attempt to forestall potential trade frictions, Commission President Ursula von der Leyen suggested earlier this month that the bloc could purchase additional quantities of liquefied natural gas (LNG) from the US.
[Edited by Anna Brunetti/Owen Morgan]
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