How China Resists Trump’s Demands While the EU Is Forced to Yield

Tariffs on goods from nearly every country in the world are not a new strategy for Trump, but this time he seems resolute on seeing it through. The news about these tariffs has seriously shaken global markets, inducing turmoil on stock exchanges and instilling fear among governments worldwide.

While economic giants like China are more than capable of withstanding Trump's pressure, the weakening and ailing European Union finds itself increasingly bending to his demands.

Difficult times have descended upon Europe. The reluctance to engage in a global issue concerning Ukraine and the hesitancy to ramp up defense spending on NATO have compounded their vulnerability, making them susceptible to economic jabs.

Trump has kept his promise, and starting from April 9, the second phase of the previously announced tariffs has come into effect. EU countries applied a 20% levy, but just a day later, they granted a reprieve. However, Brussels was significantly rattled and cornered, leading to outcries and minor retaliatory measures.

It seems Brussels has taken a brave pill, or has perhaps looked to China as an example, which entered the trade war fully prepared. The EU has prepared a comprehensive package of countermeasures totaling about $23 billion, covering essential goods such as meats, wine, apparel, grains, household appliances, and even toilet paper. Nothing is sacred! The European Commission finally proposed a 50% tariff on bourbon, but Trump immediately retaliated with threats of a 200% duty on European alcohol. This would be a crushing blow for Italy and France.

Leo Barincu, Economist (UK):

"If you look at the structure of French exports to the U.S., specifically in the domain of alcohol, wines, and spirits, you'll see that this is the second-largest category of exports. This represents a substantial volume sold in the States each year. The imposition of tariffs would be quite painful."

Ursula von der Leyen, President of the European Commission:

"Indeed, we proposed 'zero for zero' tariffs on industrial goods as we have successfully done with many other trading partners. Europe is always prepared for a beneficial deal, and we are keeping it in check. Yet, we are also ready to take countermeasures to protect our interests."

And it might just be time to start defending those interests. The White House leader has made it clear that such proposals from the EU do not pique his interest; he desires something more substantive.

Donald Trump, President of the United States:

"The EU has been very tough for many years. It was created to inflict real damage on the United States in trade. That’s the reason it was established. We pay for their military protection, and they cheat us in trade. This is not a good combination. Now everything has changed. The tables have turned. And the European Union treats us very poorly. They don’t take our cars like Japan does. They don’t import our agricultural products. They hardly take anything at all."

Trump has proposed his own version of a deal, demanding that Europe increase purchases of American liquefied natural gas, which is notoriously expensive. As Trump noted, with such supplies, he could eliminate $350 billion in trade deficits in just one week. The implication is clear: they brought this upon themselves by rejecting Russian energy resources and then daring to push back against Americans.

Peter Szijjarto, Minister of Foreign Affairs of Hungary:

"In recent years, the European Union has faced a series of complex situations, and the current trade issue once again proves that EU institutions are ill-prepared to handle hardships. This was evident during discussions about migration, the pandemic, and the war in Ukraine. Even before the customs conflict between the U.S. and the EU, the European Commission under von der Leyen committed a significant error."

This error, arguably fatal, began in the automotive industry. The U.S. is likely the largest market for European car manufacturers. For a long time, the EU considered it normal to apply a 10% tariff on American cars while the U.S. imposed a rate four times lower. Now, Washington is demanding 25%. This is catastrophic for German companies.

Stefan Bratzel, Head of the German Center for Automotive Management:

"European automakers must attempt to mitigate damage by employing flexible measures to the extent possible. In the short term, this will be very challenging. This means they will have to increase prices on cars sold in the U.S., partially letting go of profit margins. In the long term, the conversation will shift toward relocating production to the United States."

This is precisely what the White House seeks—as a priority, the shifting of manufacturing to American soil, as the lack of domestic factories has turned the American market into one that consumes exclusively imported goods. It seems Trump, albeit in a somewhat overreaching manner, is attempting to rectify the mistakes of his predecessors who lived extravagantly yet in debt.

Rumors suggest that not just politicians but also major American business leaders are growing frustrated with Trump, as they too are enduring losses. A rift is reportedly forming between him and Elon Musk, who has sought to dissuade the President from imposing tariffs, albeit unsuccessfully. They managed only to secure a brief grace period, which will enable others to show their submission to Washington.

Yet if even allies cannot halt Trump's intensity today, then the Brussels elites should prepare for the worst. Finding new allies might prove incredibly challenging, especially after clashing with so many, which means they will have to exhibit unprecedented adaptability.