EU's Trump plan requires carrots, sticks and vibes

Reuters

10-02-2025

LONDON, Feb 10 (Reuters Breakingviews) - Ursula von der Leyen ought to be readying her best impression of Jean-Claude Juncker. The European Commission president's predecessor found a way to manage Donald Trump's aggressively transactional approach to global trade during the latter's first administration. In the wake of the U.S. president's antics imposing and then lifting 25% tariffs on Canada and Mexico – and new threats to target steel and aluminium exports as soon as Monday – von der Leyen's toolkit needs to include carrots, sticks and vibes.
Juncker's strategy back in 2018 started with sticks. Responding to Trump's U.S. steel and aluminium tariffs on national security grounds, he imposed duties, opens new tab on emblematic American goods made in Republican-leaning states, such as Harley-Davidson motorbikes, bourbon and orange juice. But faced with the risk of Trump slapping tariffs on European cars, the EU also pivoted to carrots: it pledged to buy more U.S. liquefied natural gas (LNG) and soybeans, opens new tab.
In 2025, von der Leyen is more likely to choose carrots over sticks. Given core member states France and Germany are beset by low growth and political strife, she presides over a weaker club. As well as LNG and farm products, she can encourage member states to hike defence spending to 3% of GDP, and buy more American arms as the bloc tries to face down Russia. She could also cut tariffs, opens new tab on U.S. cars from their current 10% – which sounds doable, given other auto exporters like Japan and South Korea already enjoy zero levies.
It's possible this proves enough – after all, Trump delayed Mexico tariffs for a month after President Claudia Sheinbaum signalled troop reinforcements at the U.S. border. But the U.S. trade-in-goods deficit with the EU is still 156 billion euros, opens new tab, which will keep the president's hackles raised. And as Washington-focused consultants at Signum Global Advisors point out, his second administration may be more focused on using its leverage to demand a rollback of European technological and environmental regulation.
If so, ambitious Brussels regulations like the Digital Markets Act (DMA) and the Data Act may come into Trump's sights. These legislative forays seek to force U.S. Big Tech to open up the walled gardens of their platforms to competition. The stakes are high: Meta Platforms (META.O), opens new tab, Google owner Alphabet (GOOGL.O), opens new tab and Apple (AAPL.O), opens new tab all source nearly 30% of their revenue from Europe. And there are already multiple battlegrounds.
The Commission's preliminary view on Meta's 'pay or consent' advertising model, for example, is that users lack a real alternative – they have to choose between paying for an advertising-free version of Facebook or Instagram, or giving consent to have their personal data used for targeted ads. Mark Zuckerberg's $1.8 trillion company has also delayed releasing its LLaMA artificial intelligence model in the bloc, due to reservations about disclosure and transparency obligations under the EU's AI Act. Meanwhile, the DMA puts restrictions on how Apple collects and uses personal information, making it harder for the $3.4 trillion group to tailor AI features that have not received explicit user consent.
With an EU decision on Meta due as early as March and similar investigations, opens new tab into Apple and Alphabet ongoing, the obvious risk is that von der Leyen buckles too easily. But there's also danger in going too hard the other way. The EU could theoretically unleash its 'anti-coercion instrument', which came into force in 2023, to dilute Big Tech's intellectual property protections, like those pertaining to software and download rights. But that would be hard to implement, and akin to 'nuking a country that attacks you with a tank,' according to Fredrik Erixon, director of the European Centre for International Political Economy.
A halfway house would be for von der Leyen to exploit what room she has to manoeuvre. The EU's outstanding Big Tech cases are its first under the DMA, Erixon points out, which means there are neither established precedents nor methods for investigating the extent to which a company is in violation of a particular obligation. Exactly how the Commission deals with evidence of a breach of its rules is therefore not set in stone. That gives it some flexibility in determining whether any future fine amounts to the maximum 10% of annual revenue. For more recent pieces of legislation like the AI Act, the bloc could just push back its 2026 compliance deadline.
Templates for artfully diluting cherished EU regulation do exist. Climate Commissioner Wopke Hoekstra announced last week that the Carbon Border Adjustment Mechanism (CBAM), which will slap a green tax on carbon-heavy imports into the EU starting in 2026, may only apply to the biggest 20% of companies. That still captures most of the emissions, yet strikes a deregulatory tone in keeping with the EU's new ' Competitiveness Compass, opens new tab '.
Exactly how von der Leyen threads this needle on Big Tech regulation will be critical. But as Sheinbaum has shown, sometimes you don't need to shift much to make a difference. In that respect, vibes may be as important as carrots or sticks.
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CONTEXT NEWS
U.S. President Donald Trump said on February 9 that he would introduce new 25% tariffs on all steel and aluminum imports into the U.S., on top of existing metals duties.
Asked if France and the European Union would respond, French Foreign Minister Jean-Noël Barrot said on February 10: 'Of course ... This is already what Donald Trump did in 2018, and we responded. We will again respond.'
The EU trade and investment relationship with the U.S. is the biggest in the world, and both should be looking at strengthening this relationship, a European Commission spokesperson told Breakingviews on February 4 when asked about potential U.S. tariffs on European goods.
'The EU firmly believes that low tariffs drive growth and economic stability within a strong, rules-based trading system. However, the EU would respond firmly to any trading partner that unfairly or arbitrarily imposes tariffs on EU goods,' the person said.
Trump, responding to a question on February 2 on whether he plans to slap tariffs on products coming from the UK, pivoted to hammering Brussels: 'It might happen with that,' he said. 'But it will definitely happen with the European Union. I can tell you that, because they've really taken advantage, you know, we have over (a) $300 billion deficit.'
In 2023, the U.S. trade in goods deficit with the bloc was 156 billion euros, according to EU data. In trade in services, however, the U.S. had a surplus of 104 billion euros.
The U.S. trade in goods deficit with the European Union increased by $26.9 billion to $235.6 billion in 2024, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced on February 5.
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