European unity would have broken down in a trade war with the US
European Union
negotiators' take on the
tariff deal agreed with US president Donald Trump
this week.
The agreement saw the EU accept tariffs – or import taxes – of 15 per cent on practically all future trade with the US.
US products heading in the other direction will not be subject to similar levies when sold into the EU. Indeed many pre-Trump tariffs the bloc charged on US goods at lower rates of 1 to 4 per cent will be dropped to zero. This deal is the product of the EU's strategy of calm dialogue over confrontation.
The French government has led the criticism of the tariff deal, summing it up as the EU submitting to Trump. Some in Ireland have also expressed concern, but the Government knows it is in no position to gripe.
READ MORE
Given its exposure and dependence on trade with the US, Ireland was insistent throughout the talks that the EU should avoid doing anything to antagonise Trump or escalate the dispute.
The
European Commission
, the EU's executive arm that led the talks, was not negotiating a trade deal. That would involve two countries or economic blocs trashing out a mutually beneficial accord, with concessions on either side.
This was a loose political agreement on tariffs, where the EU sucked up a certain amount of pain to put an end to Trump's threats of even higher charges. Thoughts of an open tariff brawl between the two sides, escalating into a trade war, struck fear into the hearts of officials and politicians in Brussels, Dublin, Berlin and many other capitals.
European trade commissioner
Maros Sefcovic
, who was heavily involved in the talks, has insisted this truce was the best it could get.
Commission officials were privately smug when UK prime minister
Keir Starmer
signed a deal with Trump in June locking in 10 per cent tariffs. The EU felt confident it could land more favourable terms, given its greater economic heft.
That thinking put too much weight on rules that previously governed global trade relations and failed to fully consider Trump's animus towards the European project.
The EU also failed to fully grasp Trump's vision of tariffs as leverage for negotiating concessions from allies and generating tax revenue.
In a normal year the US collects about €8 billion from – mostly very low – tariffs on EU goods. Internal commission calculations predict Trump's tariff shakedown will lead to about €80 billion a year being collected by the US. Those sums even take account of some slowdown in trade as a result of the tariffs raising the cost of EU-made products in the US.
The alternative would have been to call the US president's bluff and see if he followed through on threats to put 30 per cent tariffs on trade on August 1st. Turmoil in the financial markets previously forced Trump to reverse the excesses of his 'liberation day' tariff agenda. This might have happened again.
The problem for European Commission president
Ursula von der Leyen
was that EU unity would not withstand any kind of prolonged trade war.
An autocratic system such as
China's
can unilaterally match Trump's tariffs with its own, increasing the rates again and again to force Washington to the negotiating table on a more equal footing.
The EU is a composite of 27 member states, each with different economic pain thresholds and perspectives on how the talks should be run.
France
is talking a tough game now. It was also lobbying hard behind the scenes to water down proposed retaliatory tariffs, one of the main pieces of leverage in the talks. Paris wanted the commission to drop plans to threaten counter-tariffs on US whiskey, bourbon and agricultural produce, fearing French wine, champagne and dairy would be targeted in response.
Minister for Foreign Affairs Simon Harris sent Sefcovic a shopping list of US products the Government wanted spared. It included aircraft, bourbon, agricultural goods, medtech, thoroughbred horses, animal feed and ingredients used by food producers.
Ireland's had been one of the loudest voices of caution. The Government pushed back against the idea of the EU using emergency powers to target US multinationals and tech giants in the dispute.
The commission was afraid a cycle of US tariffs and EU counter-tariffs would have put millions of jobs in Europe at risk. In such a scenario the governments of Germany, Italy, Ireland and others would have been clamouring, if not screaming, for the EU to cut a quick deal that stopped the economic bleeding.
The end result of that alternative timeline might still have been blanket US tariffs of 15 per cent or painfully higher rates.
Maybe Trump would have blinked first. We won't know.
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