As Trump’s “Liberation Day” of Global Tariffs Nears, Europe Is in a Tight Spot

A trade war is a ‘lose-lose’ battle. Smart taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. policy can accelerate the EU’s economic growth.

President Trump has made it clear that, friend or foe, the US is set on using economic coercion to get its way. He is also making the implicit bet that, in a race-to-the-bottom trade war where everybody loses, the US will be slightly better off than the rest of the world.

It’s not surprising that, in the short term, European policymakers judge the risk of not retaliating to be higher than doing so despite the negative economic consequences. However, the EU will need to choose its battles wisely.

That is because the EU is facing two other structural threats simultaneously: a growing military threat from Russia and a single common market saddled by overregulation and an aging population.