Luděk Niedermayer is a member of the European Parliament and vice-chair of the Committee on Economic and Monetary Affairs.
U.S. President Donald Trump’s tariff roulette is affecting the entire world. Rather than simply escalating the trade war through retaliatory tariffs, however, affected countries also have the option to choose a different path, separating the unpredictable, protectionist U.S. from those who favor fair, mutually beneficial trade.
And as Trump’s America motivates countries to create new alliances and trade agreements, the EU is well positioned to lead this approach and has the potential to be a welcome trade partner for many nations.
This is particularly true of countries that share similar values and interests with the EU, such as the U.K., Canada, Japan, South Korea and Australia, but there’s also a chance to strengthen trade relations with others. Talks are already underway with India, and opportunities to balance trade with China, which has been severely affected by U.S. sanctions, are also emerging.
According to economists from the European Central Bank (ECB), expanding trade with third countries like this could help offset the impact of conflict with the U.S. However, there’s also a catch. Europe won’t become an attractive partner simply because it’s reliable and avoids rash, unpredictable decisions. A strong economy is key to forming successful partnerships — unfortunately, the EU doesn’t have one today.
After the alarming competitiveness report from former ECB President Mario Draghi, which was widely accepted in the European Parliament, EU leaders appear reluctant to implement necessary changes. Paradoxically, one reason for this could be the bloc’s slightly positive economic growth outlook, supported by higher state spending in Germany and increased defense spending across much of the bloc, under the “Buy European” principle.
But it is a fatal mistake to believe this will solve the problem. These measures increase debt, and temporary incentives can’t replace the fundamental reforms Draghi called for.
Moreover, the fear that leaders will put these changes on the back burner is very real, as was evident at the recent European Council meeting, where the main economic agenda just included simplifying legislation, attempting to reduce energy prices, and creating a union of savings and investments. Focusing on such regulatory changes — which are mostly aimed at cutting red tape — risks overshadowing the substantial reforms needed to truly benefit the Europe’s economy.
The meeting’s competitiveness agenda also avoided most important “reform topics,” and discussions lacked clear substance that could deliver quick improvements. For example, there was no mention of countries supporting agreed trade facilitation deals or of reforms like removing barriers to the single market.
It is also unclear what level of support that proposals like the 28th regime, which is designed to establish uniform conditions for innovative startups, or the Debt-Equity Bias Reduction Allowance proposal, which would favor financing companies with equity rather than loans, will receive.
This is precisely what ECB President Christine Lagarde was referring to when she stated that U.S. tariffs present a unique opportunity for Europe to take its fate into its own hands — precisely what was missing from the Council’s agenda.
Lagarde is right. Under the influence of the dramatic shift in U.S. politics, which may or may not be permanent, Europe must stand on its own two feet. If, in addition to its core values and overall stability, it makes the right decisions to strengthen its economy, the EU model will present a clear alternative to Trump’s America.
Other countries could then choose between the Trump model and the European approach to society, values and economy — and the outcome of that choice could significantly reshape the world.
Unfortunately, however, the current approach of EU members to the economic agenda doesn’t inspire optimism. Perhaps prime ministers and presidents don’t realize the gravity of the situation, or they believe in the status quo — that member countries are only able to respond quickly to big threats and otherwise prefer to “throw sand in the gears,” or simply feel the necessary steps wouldn’t be welcomed by their voters.
Either way, time is running out. And through its hesitation, Europe risks missing its chance to become one of the leaders of a free, responsible and democratic world.
