The ‘Doors’ are back, at least in the incarnation of Scott Bessent who interpreted Trump’s recent tariff attack on the EU as a way to light the fire under the EU. It worked. The always obedient President of the Europan Commission rushed to the phone and called up President Trump with the promise of swift negotiations. Simultaneously, the chief trade negotiator of the EU changed his tone and no longer mentioned the threat of retaliation. It seems that the EU still has not understood that showing accommodating signs is interpreted by Trump as weakness and encourages him in his hard stance.
Out of fairness, I should mention that on the basis of the Treaty is the Commission who negotiates trade agreements and sets trade policies. The Commission, though, is the agent and the principal is the European Council where the heads of state negotiate and decide the zones of compromise for the Commission. Here, national preferences are key. In some cases, national preferences are more or less solely formed by the export interests and trade dependence of the country. No surprise, for example, that countries like the Netherlands, Belgium, and Ireland and also Scandinavian countries hope for compromises. In other cases, most prominently Italy, it is the ideological closeness of governments to the MAGA movement that wants to avoid conflictual responses to Trump’s tariff policy.
Given those divisions, it is to be expected that the Commission will take a soft approach. The list of sectoral counter-tariffs is no real threat, not least because the US has much less to lose than the EU. The situation would be different if the EU were (a) a united and coherent block regarding retaliation and (b) if the Commission would seriously take out its big bazooka: its anti-coercion instrument - which was designed to counter China’s aggressive stance against Lithuania - allows for a quick and meaningful response to trade coercion by other countries. This instrument provides the ground to target a variety of sectors, including financial services and digital services, both sectors where the US runs a surplus with the EU.
The conditions to trigger the anti-coercion instrument are fulfilled by Trump’s aggressive tariffs, which are not based on economic sound grounds. And yet, it would mean a sharp step up in the retaliation arsenal of the EU. Something the Commission and a critical number of member states are scared about. It is a paradox that the EU gave itself a powerful instrument to only then decide not to make use of it. Trump may not know about the anti-coercion instrument. His advisors may know and will signal to their President that this is an instrument which will not be used, at least not in the case of the US. I have no clear idea what the Commission will offer Trump besides promising higher imports of liquid gas and special procurement deals for military goods. This may be sufficient to avoid the worst. It will not help to return to the pre-Trump II regime. Time will tell whether my guess is correct.