Revealed: EU’s game plan for Trump trade war

WASHINGTON — Fool me twice, shame on me — that’s the motto EU countries are going by as they prepare for a high-stakes, massive trade war with Donald Trump if he wins a second term as U.S. president next month.
European leaders learned their lesson during Trump’s first presidency and are more united and determined than ever to face him down, senior diplomats and officials from Brussels and EU capitals said in conversations with POLITICO.
“We will hit back fast and we will hit back hard,” one senior European diplomat said about the EU’s contingency plan for a Trump trade war.
A second senior diplomat from another European country confirmed that EU countries were coordinating their strategy, with the European Commission in the lead. “Brussels has a list that is ready, and they are pretty confident that they can win this trade war,” said the second diplomat.
The European Union has set up a rapid reaction force to prepare for the fallout from the U.S. elections on Nov. 5. Set up at the core of Ursula von der Leyen’s EU executive, in the Secretariat-General, the group is officially preparing for both a Democratic and a Republican victory. But EU officials refer to it colloquially as the “Trump task force.”
Brussels was caught off guard in 2018, when Trump first imposed tariffs on EU steel and aluminum, and retaliated only on part of those tariffs, hoping to de-escalate the fight.
Rather than take that olive branch, Trump doubled down later that year by threatening to impose tariffs on EU car exports. While those ultimately never went into effect, the EU was shocked to see Trump willing to upend supply chains and rip up ties with Washington’s most important allies.
“Last time we didn’t believe how far Trump would actually go,” the first senior diplomat said. “This time we’ve had time to prepare. Europe has changed a lot, and we will be ready to act.”
The EU leaders’ thinking is that the harder the retaliation, the faster Trump will be brought to the negotiating table, the senior diplomats and officials told POLITICO. All were granted anonymity to discuss the sensitive deliberations.
The goal was to inflict so much pain that Trump would be forced to negotiate immediately — with the EU in a better position. The unpalatable alternative, they argued, would be a spiral of tit-for-tat retaliations stretching out over years.
“The Commission has prepared substantial retaliation so that we push Trump for a deal in the first round,” said the first diplomat.
For now, the steel fight is in a state of suspended animation, after the EU extended a pause on its duties last December for 15 months. That hiatus will end next March, meaning that, whether Trump or Kamala Harris ends up in the White House, there will be a reckoning within weeks of the next U.S. president taking office.
Trump has made no secret of his plan to impose across-the-board tariffs of 10 percent or 20 percent on friends and foes alike if he wins the election. In his rally speeches, he reserves a special spite for Europe, and, in particular, for Germany’s car industry.
He has promised not just to bring down America’s trade deficit by imposing massive tariffs on European products — but also to destroy European industry in the process and force businesses to move factories to the U.S.
Just days ago, Trump also complained about EU competition investigations into American tech giants, saying he had spoken with Apple CEO Tim Cook about an EU court ruling that forced Apple to pay €13 billion in unpaid taxes to Ireland. Trump vowed to tackle those decisions if he is elected.
European leaders, officials and business bosses are particularly worried about what they describe as the obsession of Trump and his acolytes with the German car industry.
If Trump follows through on that threat, as many believe he will, the consequences could be disastrous not just for Germany but for most of the EU’s major economies.
Manufacturers such as ​​Volkswagen, BMW and Daimler operate plants in Britain, Spain, Poland, Belgium, the Czech Republic, Hungary, Romania and other countries. They source car parts from suppliers all across the EU.
The U.S. is the biggest importer of German cars, ahead of China, by value, so any tariffs would hit one of the major lifelines of Europe’s economy.
“We’re worried about Trump’s fixation on cars, because the German car industry is so deeply intertwined with every EU country,” said a third diplomat.
The end game, for the EU side, would be a negotiated solution. Trump, they believe, may be trigger-happy on tariffs — but he’s also keen to negotiate. “He’s a deal-maker at heart,” said the third diplomat, citing Trump’s re-negotiation of the free-trade zone with Mexico and Canada, and deals with South Korea, Japan and China. 
One part of those negotiations, officials and diplomats said, would evolve around closer cooperation between the EU and the U.S. on China. 
“The Americans should be more friendly to Ursula if they are serious about taking on China together,” said the first diplomat. 
Companies on both sides of the Atlantic are bracing for what they believe could be a destructive process to get to such a negotiated solution. 
“Brussels is making contingency plans in the event new tariffs are applied. That’s not surprising,” said Marjorie Chorlins of the U.S. Chamber of Commerce.
“The question is: If that were to happen, is there room for a negotiated resolution that’s mutually acceptable? No way to know that as of today, though it’s clearly in neither side’s interest to go down that road.”