EU faces unpredictable 'Trump 2.0'

Taking on tariffs

The economic scenarios are even scarier, Leonard said, and if Trump keeps his promise of levying across-the-board import tariffs, a trade war between the EU and its biggest export market is inevitable.

"In a world where geopolitics and geoeconomics are increasingly intertwined, the bloc should prepare countermeasures against the US and seek to expand trade with the rest of the world," he said.

Ignacio Bercero, Petros Mavroidis and Andre Sapir, three Bruegel research scholars, echoed the view. In an article on Dec 9, they argued that if Trump pushes forward with his tariff threats, the US would be ignoring its WTO commitments and would also roll back the substantial liberalization that has taken place during the past 80 years, with a potentially major negative effect on the world economy.

Most Europeans still remember the tit-for-tat tariff war during Trump's first term in 2018 when the US imposed tariffs on steel and aluminum around the world. The EU retaliated by imposing hefty tariffs on Harley-Davidson, Zippo lighters, Levi's jeans and Kentucky bourbon.

In 2018, Trump described EU-US trade as "very unfair" and warned that his many problems with Brussels "may morph into something very big". He also accused German cars of posing a national security threat.

Ruben Dewitte and Inga Fechner, two economists at Dutch bank ING, pointed out that protectionist measures may strain EU-US trade relations in the longer term, further eroding the EU's struggling manufacturing sector.

They noted that Trump's second term hits the European economy at a much less convenient moment than the first term when the European economy was relatively strong.

"This time around, it is experiencing anemic growth and is struggling with a loss of competitiveness. A looming new trade war could push the eurozone economy from sluggish growth into recession," they wrote on the ING website.

The US is the EU's largest trading partner as of last year, with total trade of goods hitting $925 billion, a surplus of nearly $173 billion for the bloc.

Lai Suetyi, an associate professor at the Center for European Studies at Guangdong University of Foreign Studies, told China Daily that the EU is worried about "Trump 2.0", citing the many discussions, debates and media coverage going on in the past months regarding his second presidential term.

The EU has started preparing for these months ago, Lai said, adding that the European Commission has set up a team to face the new US administration. But Trump's unpredictable nature makes preparations on how to deal with him difficult, she added.

"These are bad news for the EU, which has already had economic difficulties," Lai said.

The EU's two largest economies, Germany and France, are haunted by domestic political and economic chaos. Scholz's coalition government has collapsed and he lost a confidence vote on Monday in parliament, paving the way for snap elections on Feb 23 that he is most likely to lose. In France, Macron nominated Francois Bayrou as the new prime minister last week, succeeding Michel Barnier, who was ousted in a vote of no confidence on Dec 4.

Julian Hinz, research director for trade policy at the Kiel Institute for the World Economy, suggested that to avoid an escalation, the EU could present a proposal for a trade agreement with the US that is limited to individual sectors. Meanwhile, the EU should diversify its trade relations and quickly be able to defend itself militarily without US help in order to strengthen its negotiating position.

"Maintaining the global trade order must also be the EU's top priority. A collapse of the WTO would hit the EU much harder economically than US tariffs. Trump's announcement shows how important it is for the EU to act strategically and cohesively, with all member states speaking with one voice," Hinz said.

Sabine Weyand, director-general for trade at the European Commission, told a recent seminar that what the EU has been doing and continues to do is "analyze all possible announcements so that we can prepare for scenarios".

"Our default approach is to say we are interested in a cooperative agenda, with whoever sits in the White House. We are also prepared for disruptive scenarios," she said.

She added that "there is a whole world out there that does not want to choose camp" and the US market accounts for only 15 percent of the world's imports.

Affecting ties

While some suggested that the EU should try to please the China hawks in the Trump administration to get tough on Beijing so that the president-elect might spare the bloc, John Clarke, a former EU trade negotiator, said he hopes that the EU will not be forced to choose between the US and China.

"I think the EU is big enough not to do that," he said in a recent forum in response to a China Daily question.

"I'm quite sure the European Union will continue in the next four years to trade and invest heavily in the US and to trade and invest heavily with China.

"The EU and China are going to be very, very important partners in the next decades," he said, citing the 2.3 billion euros ($2.4 billion) daily trade between the two sides.

Denis Depoux, international managing director of Roland Berger, a consulting firm, predicted that the EU will be more important for Chinese companies because of US market restrictions.

He said that if Trump hits Chinese companies, it should pave the way for a more positive relationship between China and the EU.

"Therefore, the EU and China need to write a new page for their economic relationship," he told China Daily. Roland Berger has worked with the China Chamber of Commerce to the EU in the past five years in publishing an annual survey of Chinese companies in the bloc.

Depoux expressed hope that the EU and China can resolve their electric vehicle dispute through negotiations, which will serve as a good example for EU-China relationship going forward.

China and the EU are continuing their talks, hoping to reach an agreement based on minimum price commitments after the EU slaps countervailing duties on Chinese EV imports.

Ding from Fudan University said Trump 2.0 poses both challenges and opportunities for China-EU relations.

He said Trump's trade policy against both China and the EU will also hurt European companies engaged in trade and investment with China.

"This might encourage more contacts between the EU and China as a boost to bilateral relations," he said.

"On the other hand, we cannot exclude that the EU will to some extent try to win favor from China hawks in the Trump team for mercy for the EU from the US administration," he said, adding that the bloc will not go too far down that path for fear of backlash at home.