The EU and United States seem set for a potentially highly damaging trade war following Donald Trump’s turbulent start to his second term in office.
The decision by US President Donald Trump to place a 25% tariff on all steel and aluminium imports has left some of the US’s major trade partners scrambling to make a deal. Trump has said his latest tariffs will take effect on 12 March “without exceptions or exemptions”.
European Commission President Ursula von der Leyen responded by saying “unjustified tariffs on the EU will not go unanswered”.
It’s unclear what deals might actually be cut or waivers granted over the next month but at least one senior EU political figure, David McAllister, a German Member of the European Parliament, has warned that Europe should consider “far-reaching measures” as a response.
The first few, highly-charged weeks of President’s Trump return to the White House has prompted some concerns among many and they include McAllister, who is the long-time chairman of the EU Parliament’s influential foreign affairs committee.
In a wide-ranging interview with Modern Diplomacy, the veteran centre right politician spoke about how the EU should respond to President’s Trump’s trade tariffs and much else besides.
On the prospect of trade wars, he says, “With regard to President Trump’s tariff threats, the European Union will be able to rely on extensive preparations. We may adopt a three-faceted approach in dealing with our American partners, should the US administration decide to install tariffs akin to those imposed on Canada or Mexico.”
As a first step, he says the EU will “always endeavour” to address President Trump’s desire for “deals”, adding, “This transactional strategy will be guided by the goal of strengthening US exports in key sectors such as energy and defence.”
The EU, he adds, could commit to expanding LNG imports from the US, and could also explore new opportunities to conclude two agreements that the European Commission negotiated with President Joe Biden: the Global Agreement for Sustainable Steel and Aluminium and an EU-US agreement on critical minerals.
The EU-US Trade and Technology Council (TTC) to promote cooperation on digital issues such as AI and export controls could, he believes, “open up additional avenues for collaboration.”
“Should this approach fail,” he goes on, “our focus must be on containing the level of escalation through reciprocal tariffs.”
“It is crucial to make clear to the new Trump administration that Europe does not seek to disrupt trade relations and will only do so as a last resort.”
However, should President Trump threaten wider disruptions similar to those in his first term – such as imposing Section 232 tariffs on European vehicles and car parts, or enacting a general 10% tariff – Brussels could respond “with more far-reaching measures than before.”
The European Commission, the legislative arm of the EU, could, argues McAllister, impose reciprocal tariffs to “offset some of the economic damage” and bring cases before the WTO.
There would also be the possibility to use the previously unused “anti-coercion tool,” which would allow the EU to swiftly impose countermeasures such as tariffs and restrictions on trade, investment, and public procurement, he notes.
On transatlantic relations generally, McAllister what were the main challenges for the EU under a Trump presidency, whether Europe now take more responsibility for its own foreign and defence policy and if the Trump presidency pushes EU nations to reassess their relations with the US.
On at least one of these he is emphatic, saying the transatlantic partnership is, he replied, “indispensable for Europe.”
“Due to the resurgence of global systemic conflicts with acute threats of violence, the connection to the US is all the more crucial.”
Conversely, Europe, he adds, remains important to the US “because the Americans cannot navigate global upheavals alone.”
Europe, therefore, “should do everything to proactively explore shared interests and opportunities for transatlantic cooperation.”
One of the “biggest risks” in dealing with President Trump, says McAllister, is that the EU or individual member states “fall into a reflexive policy of rejection instead of seeking areas of common interest in a pragmatic way.”
“It would,” he suggests, “be wise to respond to Trump’s transactional political style and proactively make offers on defence spending, arms investments, and strengthening our contributions to NATO.”
“One of our main tasks is to rapidly enhance our strategic, operational, and defence capabilities, to strengthen the European pillar within NATO. Only this way can we become an equal partner to the US. It is about remaining transatlantic while simultaneously becoming more European.”
McAllister, first elected an MEP back in 2014 and foreign committee chair since 2017, notes that 330 million Americans have “already signalled that they are no longer willing to shoulder the majority of the defence burden for 450 million Europeans.”
“That approach is unsustainable,” he continues, saying, “The key question is whether Europe can finally develop the military capacity that this continent should have had long ago.”
“Let us not underestimate the seriousness of this task or the commitment required from our side to complete this process. Currently, Europe depends heavily on the United States across nearly all critical military categories.”
“More initiative and seriousness are required. In any case, it would be preferable to approach the Trump administration with clear proposals about what we intend to do in Europe, rather than asking what the new US administration will do for us.”
We also asked the MEP, a member of the European People’s Party (EPP) about the prospect of President Trump pushing Ukraine into making significant concessions to Russia and, if so, how big a concern/ threat would that be.
“Mr Trump has often spoken of a “quick deal” to resolve Russia’s war of aggression against Ukraine,” says McAllister, before asking, “The question remains: what would such a deal look like in detail?”
“The President has now suggested that he is willing to maintain the US weapons supply and military aid to Ukraine in exchange for certain rare earths, titanium and lithium. This proposal broadly aligns with President Zelensky’s “victory plan”, who suggested agreements between Ukraine and the US for joint extractions and utilisation of Ukraine’s resources.”
This could, adds the MEP, “be mutually beneficial for both sides in the medium and long-term” – provided Ukraine would be able to regain control over conflict zones or regions under Russian occupation, such as Luhansk and Donetsk, where many of Ukraine’s raw materials are located.
“Any such deal should be jointly agreed between the US and Ukraine, and should be based on fair agreements that would allow Ukraine to build a safe and economically stable future.” said McAllister who was elected a Member of the European Parliament as the CDU’s top candidate in Lower Saxony.
The EU has been a constant and steadfast supporter of Ukraine since the war started and McAllister is adamant when he says, “It is important that Ukrainian sovereignty must not be compromised by finding a supposed “peace deal” that is decided over the heads of the people.
“This would only serve to strengthen Russia, and would be a significant strategic mistake with far-reaching consequences for Europe and the world. A dictated peace favouring Russia must be avoided.”
He adds, “The war in Ukraine is being fought on European soil. If necessary, we must provide even greater support for Ukraine’s defence, including advanced weapons systems like the Taurus cruise missile. Europe is capable of empowering Ukraine to sustain itself in this war. Ukraine also needs a clear and concrete perspective for EU membership and strong security guarantees.”
Modern Diplomacy also how concerned he is about yet another controversial decision by the new president, this time to pull out of the Paris climate deal, NATO and WHO.
President Trump’s first term in office was a “good indication of what we should expect now,” says MacAllister, a member of the Christian Democratic Union party in Germany, adding, “The years between 2017 and 2021 were characterised by unpredictability and a discrepancy between what the President said and what his administration did.
“He has always doubted the usefulness of international institutions, which was underlined by his decision to withdraw the US from the Paris Climate Accord and from the World Health Organisation (WHO) a few hours into his second presidency. Considering the current rise in bird-flu cases, it remains to be seen how many benefits the US will draw from no longer being a member of an organisation that does not only monitor global health trends, but provides frameworks for joint action on critical health matters, sets norms, provides technical support, and produces valuable research to inform national health policies,” he told this magazine.
His decision to leave the Paris Climate Accord is, states the MEP, “equally regrettable, considering the various climate challenges that our planet faces.”
McAllister, deputy leader of the EPP in the parliament, said, “I am convinced that we can only solve those problems together.”
When it comes to NATO, he wishes to “underline that President Trump cannot simply decide to withdraw.”
McAllister points out that with bipartisan agreement, the National Defence Authorization Act 2024 was passed at the end of 2023, stipulating “that the President is not authorised to suspend, terminate or cancel the Washington Treaty or declare the withdrawal of the US.”
“This would require a two-thirds majority in the Senate or a congressional resolution. However, Mr Trump could damage the credibility of the NATO alliance through his rhetoric alone.”
So, what does he also think of President Trump’s novel take on Greenland and Gaza?
McAllister told us, “In the tense geopolitical climate, not only Greenland but the entire Arctic is of legitimate strategic interest to the US,” adding, “Strengthened cooperation with Greenland and other parts of the region would make sense from a security policy perspective, particularly in the face of competition with China and Russia.”
Since the 2000s, the People’s Republic of China has, he says, increased its engagement in the region. Bilateral agreements between China and Arctic countries such as Sweden, Norway, and Denmark, which have allowed China to establish its own research stations or collaborate on scientific and technological projects, “marked the beginning of extensive Chinese presence,” he goes on.
“Furthermore, President Xi Jinping has made it clear that his goal is for China to become a “great polar power” by 2030. This is not surprising in the context of China’s broader geopolitical ambitions.”
The Arctic, furthermore, is “one of the few regions where control over the future order has yet to be fully determined.”
However, “none of this changes the simple fact that Greenland, as a self-governing part of the Kingdom of Denmark, is sovereign.”
“Questioning territorial boundaries constitutes an attack on the international order and a regression to 19th-century imperialism. Historically, the US has been a guardian of this order, and the new Trump administration should avoid creating a different perception of the United States. It is essential to avoid the impression that the strength of international law can now be replaced by the “law of the strongest.”
McAllister says that such a shift would create a “dangerous precedent in times of intense territorial disputes worldwide.”
“Regardless, it remains to be seen how the people of Greenland will position themselves on the issue of possible independence from the Kingdom of Denmark. Closer cooperation with the US could also bring security benefits to the transatlantic defence alliance. However, both decisions should be made in Nuuk – not in the White House.”
The MEP has similar concerns about how the Middle East may look under the new administration, saying, “President Trump’s proposals dramatically fail to recognise the grave situation in Gaza and the volatile security situation in the entire Middle East.”
“The staggering scale of destruction and human suffering in Gaza requires a comprehensive international commitment, in which the United States should lead the way together with the EU, the Arab states and other international partners.”
He goes on to warn that a ‘relocation’ of the Palestinian civilian population to neighbouring states – “which would also take place against the will of the responsible governments” – would not only be “contrary to international law, but would also provoke new violence and suffering on the ground.”
The two-state solution between Israel and the Palestinian territories, on the basis of the 1967 borders and with Jerusalem as the shared capital, “remains the only way to bring lasting peace to the region, and enable the local population to live in peace and security.”
He was also asked how hard it will be to maintain a stable, balanced and predictable trade relationship that is in the interest of both the EU and the US.
On this he is clear that the US remains the EU’s “most important trading partner.”
Together they account for 29 percent of world trade, he notes before adding, “We must further develop our bilateral relations through dialogue and by vigorously defending our interests.”
The EU should work with the new administration to advance EU-US economic relations, he proposes, noting that total US investment in Europe amounted to more than €3.7 trillion in 2022 and directly supports more than 4.9 million jobs.
“A strong transatlantic partnership based on shared values and interests is crucial for jobs, growth, and security on both sides of the Atlantic. The EU and the US should continue to demonstrate strong transatlantic unity on the world stage.”
The redesigned EU-US Trade and Technology Council (TTC) aims to achieve this, says McAllister, pointing out that its structure will “adapt to the needs and priorities” of both sides.
“Mutually agreed solutions are needed for bilateral issues.”
These include American tariffs on steel and aluminium, as well as other measures that affect our trade relations, such as the US Inflation Reduction Act.
“Eight years ago,” says McAllister, a lawyer by profession, “Mr Trump’s victory took the EU by surprise. This time, we have prepared extensively for the outcome of the US election.”
The European Commission, he point out, has established a special working group to develop strategies “for both possible outcomes.”
Since 20 January, the tone of trade policy “is already much harsher.”
“His biggest threat, in terms of content, is a flat tariff on all imports – potentially ten or even 20 percent,” says the MEP, who was born in Berlin and attended a British primary school in the city.
“As a matter of fact, the Democrats also leaned towards economic protectionism in recent years – while this may have been on a much more diplomatic and measured scale, it still burdened our trade relationship: President Biden did not lift the blockade of the World Trade Organization. He introduced the Inflation Reduction Act, luring companies from abroad with subsidies worth billions. The first factories are now relocating from Europe to America. Other trade disputes were not resolved under Mr Biden either – the conflict over subsidies for aircraft manufacturers Airbus and Boeing was only postponed, not settled. A new attempt to establish a free trade agreement between the EU and the US was never made.”
While President Trump might be “less predictable and is more likely to take a confrontational stance towards the EU, the inconvenient truth is that Washington’s interest in the EU has been steadily declining for years.”
It is, suggests McAllister, who holds both German and British citizenship, a time for pragmatism, saying, “The glorious transatlantic era of the early 1990s will not return.”
That is why it is “crucial”, he argues, for the EU to conclude trade agreements with other countries and regions: Mercosur, Mexico, and Australia, “just to name a few.”
Looking to the future, he believes President Trump’s second term is an “opportunity for Europe to act decisively and reduce our dependence on the US.”
“By strengthening our capabilities and adopting a pragmatic approach, we have a chance to ensure stability, security, and mutual benefit for both sides in an increasingly uncertain world.”
