By fotogestoeber @Adobe Stock

Kim Mackrael of The Wall Street Journal reports that President-elect Trump’s tariff threats are forcing the EU to choose between absorbing economic impacts or imposing new trade barriers. The EU is preparing offers to collaborate with the U.S. but also has retaliatory measures ready. Mackrael writes:

President-elect Donald Trump’s tariff warnings are forcing Europe to confront an unwanted trade-off: Keep its own tariffs low and shoulder the economic costs, or throw up new barriers in a bid to protect vulnerable industries.

The European Union has long ardently defended the rules-based system for free trade, and last month announced a breakthrough on a giant trade deal with four South American countries. At the same time, the bloc is preparing a combination of carrots and sticks to respond to Trump’s plan to use tariffs to achieve domestic and foreign policy objectives.

Europe wants to avoid an all-out trade war. The U.S. is the EU’s biggest trading partner, with total two-way trade and foreign affiliate sales between the two economies valued at roughly $8.7 trillion, according to the American Chamber of Commerce to the EU. […]

EU officials hope to head off some of those threats with proposals that could include pledges to buy more American liquefied natural gas and defense supplies and an offer to team up with Trump in confronting Beijing. The bloc could also commit to shouldering more of the financial burden of supporting Ukraine, and member states could boost military spending, The Wall Street Journal has reported. […]

“The rules of the WTO are no longer respected by either China or the United States of America,” Macron said this month. “It’s not working.”

The EU’s trade commissioner, Maroš Šefčovič, said the bloc is committed to the WTO but believes it needs to change. “We must reinvent the WTO so it can successfully overcome the problems we face in today’s trading system,” he said during a visit this month to the organization’s Geneva headquarters. […]

That means the EU should try to keep the global trading system as intact as possible, said Gabriel Felbermayr, director at the Austrian Institute of Economic Research and one of the report’s authors. “Failing to do so would damage the EU’s trade interests with many other countries,” he said.

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