Can Europe Go On Managing Trump on Trade?

(Bloomberg Opinion) -- As U.S. President Donald Trump imposes punitive tariffs on China, the European Union could be next in line.

The EU has been performing a complex balancing act to keep Trump from pouncing. So far it has succeeded – but that may become increasingly difficult. The U.S. leader is due to decide later this month whether to impose levies on car imports, just as formal trade talks are set to start between Washington and Brussels.

If Trump hasn’t followed through on his threats against the EU, it isn’t because he sees it as less of a foe in trade matters than China. In a recent essay on “the Trump Doctrine” by Michael Anton, a former White House staffer, says the president views the European project a fraud and a front for German interests.

U.S. tariffs on European goods, especially cars, would be a disaster not just for Germany, but also for the central and eastern European countries involved in making them. France, the country most opposed to opening up European markets to U.S. agricultural producers, would be hurt by levies on its food and wines. At the same time, both European countries have major differences of policy and interest with the U.S.

With the close ties between the EU and U.S. – from a deeply integrated military alliance to intelligence-sharing – seemingly meaningless to Trump, the EU has had to walk a fine line between asserting its interests and managing U.S. demands – with some deft give-and-take across a range of areas.

Look at Iran. Europe has ostensibly resisted U.S. sanctions and pressure to exit the 2015 nuclear deal. It even set up a special-purpose vehicle to allow some trade with the Islamic Republic. But this response was more about registering disagreement with Trump’s move than actively opposing it. Notably, the EU refrained from putting pressure on Swift, the Belgian cooperative whose technology supports cross-border financial transactions, to exclude Iranian banks from the global financial system. The bloc hasn’t tried to mount a challenge to U.S. threats against European companies working in Iran. Keeping Tehran happy clearly took a back seat to the EU’s broader relationship with the U.S.

In security, the European members of the North Atlantic Treaty Organization have may have failed to honor their commitment to spend 2 percent of economic output on defense, as Trump has demanded – but they did enough to allow Trump to announce he had wrung a $100 billion spending increase out of them.

Then there is the European push to tax the tech sector. At Germany’s urging, the EU has scrapped plans for a Europe-wide levy that would fall mostly on the industry’s U.S.-based giants. But that hasn’t stopped countries like France, Austria and, most recently, the Czech Republic from devising proposals of their own. Because trade negotiations are led at the EU level, they won’t have to face off against the U.S.

In energy, Europe has responded to Trump’s opposition to NordStream 2 – a pipeline that would greatly increase exports of Russian natural gas to central Europe – by passing rules that will complicate the project’s operation once it is completed. The bloc has also sharply increased its imports of U.S. liquefied natural gas.

When talks begin on an U.S.-EU trade deal, Brussels can claim that it has never promised to relax restrictions on U.S. agricultural goods – they were excluded from the scope of discussions at the meeting between European Commission President Jean-Claude Juncker and Trump last July. But, at the same time, the EU can point to how it boosted imports of U.S. soya beans by 121% between July 2018 and April 2019.

Amid these tussles, Europe has lent some support to China in its trade battle with the U.S. – for example, by refusing to block Huawei equipment from future 5G networks or to raise broader barriers for Chinese firms. This support isn’t absolute – witness how the EU has taken a tough line on steel-dumping. But the EU-China summit last month demonstrated the parties’ desire to amicably revolve their disagreements, which largely match those between China and the U.S.: Asymmetrical market access, intellectual property protections, and obstacles to mutual investment.

It would be hard for either China or the U.S. to fight a two-front trade war. Europe’s careful maneuvers have kept the other two major world trade powers focused on each other for now.

EU officials may be some of the toughest trade negotiators on the planet – but individual member states recognize that confrontation isn’t always the best route in the face of a new, unpredictable threat. In Europe, policy is overwhelmingly seen as the art of the possible, with balance and compromise the preferred state of affairs.

The Brussels approach may fail in the end – after all, Trump’s actions are impossible to predict. If there is a deal with China, Europe may be become an attractive target for the bluster and threats of a president edging toward a re-election campaign. So far, though, its strategy appears to be working better than the more adversarial Chinese one.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website

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