Tariffs are bad for business. They harm the international division of labor and drive consumer prices upward. Their comeback signals that we are living in an era dominated by politics. A new age of power politics has begun.
Donald Trump communicates loudly, sometimes shrilly. Naming April 2—the start of an aggressive U.S. tariff program—“Liberation Day” fits the White House’s harsh strategy since he took office. Trading partners like the European Union react with shock, threatening countermeasures to the 10 percent base tariff meant to mirror others’ barriers. Leaders like Argentina’s Javier Milei and Mexico’s Claudia Sheinbaum signal concessions, bowing to the threat. Yet Trump’s rhetoric hides a deeper issue: The U.S. faces a double deficit—trade and fiscal balances deep in the red, eroding its industrial base. Tariffs and tax cuts aim to end the “Triffin Dilemma,” where the world’s reserve currency issuer must run a trade deficit to supply global liquidity. That’s the core goal.
Trade Wars and EU Outrage
History warns that tariffs often spark trade wars, damaging economies. Free trade alone enables specialization for optimal market supply. But we’re not in a textbook economy—we’re at a geopolitical turning point with raw power politics. The EU’s reaction is predictably fierce. After trips by Emmanuel Macron and Keir Starmer, the EU Commission vows retaliation. Welcome to the trade war! Yet their outrage raises eyebrows. The EU built itself on coal and farm subsidies, wielding a massive subsidy machine for industrial ambitions. Outsiders entering its market face regulatory barriers masked as “harmonization,” weakening competition and hiking prices.
The EU’s Common Agricultural Policy (CAP) exemplifies this. Meat and dairy from third countries hit tariffs and standards—officially for consumer safety, but really to protect local producers. The OECD says non-tariff barriers account for 60 percent of EU protectionism, far beyond visible tariffs. In industry, like autos, 10 percent tariffs and tailored rules shield firms like Volkswagen, forcing U.S. or Asian rivals to bear high costs and compete at a disadvantage. The EU’s “Carbon Border Adjustment Mechanism” (CBAM), starting 2026, taxes imports from lax-climate nations—sold as climate action, but a clear protectionist tool. In tech, the GDPR curbs U.S. giants like Google while boosting European firms. This isn’t free trade—it’s calculated isolation.
U.S. Strategy vs. EU Hypocrisy
The U.S. seeks to shrink its trade deficit and rebuild industry, betting on tech, energy autonomy, and open markets to lure capital, even if consumers suffer short-term. Trump’s challenge should push Europe to rethink its ways. But the EU’s indignation rings hollow. It’s long used subtle barriers—standards, bureaucracy, and sectoral tariffs—to fend off rivals. The CAP, for instance, isn’t about safety but shielding farmers. CBAM’s CO2 penalties are less about climate and more about punishing outsiders, while GDPR tilts the digital field toward European players. The EU’s protectionism hides behind noble labels, but consumers pay with higher prices and less choice.
The U.S. accepts trade-offs to break its deficit trap, while the EU clings to a failing vision. Brussels’ green, deindustrialized dream crashes against reality: a growth crisis and stagnant productivity. Europe should see this as a wake-up call to return to market principles and open trade. Yet that requires a radical shift in Brussels and beyond—unlikely given entrenched habits. The U.S. holds advantages with its tech edge and energy independence, positioning it to weather this storm better. Europe, meanwhile, risks being exposed as its economic weaknesses glare under the spotlight of this clash.
We’ll see how this unfolds. The U.S. bets on reviving its base, accepting consumer pain for long-term gain. Europe must decide if it’ll keep posturing or face its own contradictions. For now, the trade war tests both sides, but the EU’s double standards—decrying tariffs while quietly wielding its own—undermine its moral stance.