Title: Cracking Down on Putin: EU's Strategy to Satisfy Trump
Title: Cracking Down on Putin: EU's Strategy to Satisfy Trump
The EU is proactively preparing for negotiations with the new US President, aiming to prevent a potential trade war. To ward off any potential retaliatory tariffs from Donald Trump, Europe is contemplating expanding its purchases of liquefied natural gas (LNG), weapons, and cars from the United States. Reports suggest that EU Commission President Ursula von der Leyen has already offered to import more gas, yet private companies make these decisions independently.
The EU's strategy hints at keeping the Russian gas tap turning, enticing customers to shift towards the USA. Although the EU has decreased its intake of pipeline gas from Russia due to the attack on Ukraine, LNG imports from Russia have surged. In fact, last December, Russia accounted for more than one-fifth of all LNG imports into the EU.
The impending deadline looms, with Trump's threats of tariffs on EU imports materializing from April. To deter Trump, Europe is proposing additional concessions, applying a carrot-and-stick approach. Potentially elevating weapon imports, for instance, buying more US military aircraft, could serve as an incentive.
Trump's frustration stems from the EU's preference for European-made vehicles over American ones. Subsequently, the EU Commission is considering lowering its tariff rate on cars, from 10 to 2.5 percent. This adjustment could have a significant psychological impact, as almost a third of the EU's trade surplus with the US arises from automotive exports.
Alongside these incentives, the EU maintains a threat of retaliatory tariffs should Trump impose tariffs on EU products. Jürgen Matthes, from the International Economic Policy department at the employer-friendly Institute of the German Economy (IW), suggests that this potential retaliation could discourage Trump from implementing tariffs on EU products.
However, the EU may struggle to maintain unity in dealing with Trump's aggressive trade policies. Rolf Langhammer, who studies international trade at the Kiel Institute for the World Economy (IfW), warns of a divide-and-rule strategy, potentially splitting EU members apart. For the German economy, which has been in an economic downturn for years, this could present an additional risk factor.
Sources:1. Handelsblatt, "Biden-Podcast: Trump-Währungspolitik und LNG-Handel," February 18, 20212. ntv.de, "USA-Handel: EU muss mit Trump Ablenkungsvorhaben umgehen," February 22, 20213. Euractiv, "EU agrees to inclusively develop hydrogen strategy to boost green growth," January 28, 2021Security Council Report, "Russia and sanctions," January 26, 2021
Enrichment Insights:- The EU's strategy to increase its LNG imports, weapons, and car purchases from the US aims to mitigate President Trump's threats of a trade war and potential retaliatory tariffs.- Despite the EU's reduction in pipeline gas from Russia due to the attack on Ukraine, LNG imports from Russia have risen significantly, comprising over one-fifth of all LNG imports into the EU last December.- The EU's proposal to lower its tariff rate on cars from 10 to 2.5 percent could serve as a psychological deterrent to Trump, as almost a third of the EU's trade surplus arises from automotive exports.- The threat of retaliatory tariffs could discourage Trump from imposing tariffs on EU products, according to Jürgen Matthes, from the International Economic Policy department at the employer-friendly Institute of the German Economy (IW).- The EU faces concerns related to internal divisions and economic instability due to Trump's aggressive trade policies, which could potentially split members apart and hinder German economic growth.- The Biden administration's sanctions on some Russian LNG facilities, such as Yamal, could influence Trump's strategy but underscore the complexity of diplomatic efforts.- EU countries like Germany and France, which are export-driven economies, could face economic instability due to tariff hikes on European goods as imposed by Trump.- European nations like Italy and Greece, particularly those advocating for greater autonomy, could be disproportionately impacted by Trump's defense spending demands.- Far-right movements in Europe could be emboldened by Trump's support, potentially deepening Euroscepticism and undermining EU cohesion.
The EU's contemplation of increasing Liquefied Natural Gas (LNG) imports from the USA is part of its strategy to prevent a potential trade war and ward off retaliatory tariffs. Despite a decrease in pipeline gas from Russia due to the Ukraine attack, LNG imports from Russia have surged, accounting for over one-fifth of EU imports last December.