As Threat of Trump Tariffs Looms, Europe’s Leaders Seek Greater Unity

 

As Threat of Trump Tariffs Looms, Europe’s Leaders Seek Greater Unity

 

At a conference in Paris, corporate chiefs, finance ministers and top politicians called for a “Europe First” policy to counter Donald Trump’s protectionist agenda.

 

Liz Alderman

By Liz Alderman

Reporting from Paris

https://www.nytimes.com/2024/11/23/business/trump-european-union-tariffs-trade.html

Nov. 23, 2024, 12:01 a.m. ET

 

For months, European business leaders have watched as Donald J. Trump paved a path back to the White House by doubling down on an “America First” economic policy, putting protectionism and business-friendly tax and regulatory pledges high on the agenda.

 

With the U.S. presidential inauguration less than two months away, they are now furiously lobbying policymakers in Brussels with an appeal of their own: Put Europe First.

 

Nothing has galvanized the European business community quite as urgently as the prospect of a second Trump presidency, this time with Mr. Trump wielding bolder promises to disrupt the global economic order in ways that threaten to leave Europe lagging even further behind.

 

At a business conference in Paris this week, hundreds of corporate chiefs and lobby groups from France, Germany and Italy gathered to discuss just that. They described Mr. Trump’s election as a “wake-up call” for Europe to get its house in order — or face a painful economic fallout.

 

Part of their strategy is to increase investment across the European Union in areas like defense, technology and green energy, as well as to loosen regulation and link the trade bloc with common debt and a single capital market.

 

“A new American president is taking power who is, let’s say it, suspicious and skeptical toward Europe,” Patrick Martin, the president of Medef, France’s largest business trade group, said in a speech to a packed hall in Medef’s sweeping glass headquarters near the Eiffel Tower. “Europe has two months to get ready. After that, there will be a shock.”

 

Top political and economic officials from the eurozone’s biggest economies showed up to tell businesses that they heard their concerns and pledged to press policymakers in Brussels to heed the call.

 

“We need a European awakening,” Prime Minister Michel Barnier of France said on Friday before a galvanized crowd. “We have been fairly naïve,” he added. “Today, we need to start saying, ‘Europe First.’”

 

If there’s an upside for Europe from Trump’s resurgence, executives said, it is that his presidency could push the European Union to strengthen its competitiveness by creating a single market for capital, a shift its members have never managed to agree on.

 

Officials and executives at the conference rallied around a report by Mario Draghi, a former president of the European Central Bank, that urged Europe to increase public investment by nearly $900 billion a year in sectors like technology and defense.

 

Italy’s foreign minister, Antonio Tajani, said several of his European counterparts had recently agreed that now was the time to move ahead with the idea of issuing new European Union bonds to finance such spending, which Mr. Draghi said was crucial to give Europe a newfound edge for innovation in a variety of critical industries, including artificial intelligence.

 

Europe’s economy is in a much weaker position now than it was in 2016, when Mr. Trump was first elected to the White House. Countries were starting to recover from Europe’s decade-long debt crisis when the Covid pandemic hit. Then Russia’s invasion of Ukraine drove up energy costs, the effects of which have led to the collapse of hundreds of energy-intensive companies across Europe.

 

Those high energy costs have kept European companies at a competitive disadvantage with the United States, where energy is one-half to one-third the cost and promises to fall further as Mr. Trump pledges to allow for more oil drilling and explores an expansion of nuclear power.

 

Executives at the conference also pointed to regulations under the so-called European Green Deal, which aims to make Europe mostly carbon neutral by 2035, in part by requiring companies to incorporate expensive renewable energy sources. That has made it harder for European companies to compete with manufacturers from Asia and India, which are still using cheaper fossil fuels.

 

Higher energy costs have put Italy’s ceramics industry at risk of collapse, said Emanuele Orsini, the president of Cofindustria, Italy’s main business trade organization. Makers of Italian tiles for roofing, flooring and a range of other products, from bricks to exquisite ceramic vases, have lost ground to foreign competitors and will not recover unless Europe eases regulation, he said.

 

Since 2019, the European Union had passed 13,000 new regulations for businesses in Europe, compared with 3,000 in the United States, according to the Draghi report.

 

It is still unclear precisely what approach Mr. Trump will take toward Europe in terms of tariffs. Economists, executives and policymakers note that he has tended to favor bilateral trade agreements and may try to cut deals with individual European countries.

 

Mr. Tajani, Italy’s foreign minister, said he planned to travel to Washington after Mr. Trump’s inauguration in the hope of persuading the administration to avoid a trade war that could be debilitating to Italian companies. More than 10 percent of Italian exports, from machinery to luxury handbags, go to American buyers.

 

“We need to talk to the Americans about trade, trade, trade,” Mr. Tajani told the audience.

 

Roberta Metsola, the president of the European Parliament, likewise warned against the risk of a trans-Atlantic trade war. “There’s an instinct to become more protectionist,” she said. “But my fear is it’s a race to the bottom.”

 

Some business chiefs said it was too early to sound an alarm, adding that Mr. Trump’s more worrisome policies, particularly the threat of tariffs on goods from China, Europe and Mexico, carried a built-in brake that might prevent him from applying them in full, especially if they raised inflation in the United States.

 

In addition, the U.S. dollar is likely to stay strong against the euro, resulting in an expected bump in growth for exports. A weaker euro would be a boon for European exporters because it would make their goods cheaper in the United States, offsetting some of the potential pain from higher tariffs, some executives said.

 

Many of Europe’s economies are dependent on exports, but so are other countries around the world, including China. Mr. Trump’s tariff proposals could lead to fierce competition to expand market share outside the United States.

 

That prospect struck a nerve with many of the executives gathered in Paris. “I’m more concerned about the huge tariffs the U.S. wants to put on China,” said Christian Diemer, a top official of the German BDI trade group. “Chinese goods meant to be exported to the U.S. will be pushed into the European markets.”

 

Overall, Europe is bracing for “stronger protectionist measures and more unpredictability,” said the French economy minister, Antoine Armand. That means that Europe must act faster and more efficiently to safeguard its interests.

 

“We need to change the pace at which we act or industries will disappear,” he said.

 

Patricia Cohen contributed reporting from London.

 

Liz Alderman is the chief European business correspondent, writing about economic, social and policy developments around Europe. More about Liz Alderman