Dem
47
GOP
53
Donald Trump has often said that "tariff" is his favorite word and he intends to say it a lot as soon as he is in office. He will hit China hard, but also Europe, which exports more to the U.S. than it imports. The E.U. is well aware of Trump's plans and is making its own plans to respond when Trump pulls the trigger. Last time Trump did this, the E.U. levied highly focused tariffs carefully designed to hurt specific companies in specific states that could pressure Trump. For example, Harley-Davidson motorcycles were targeted because they are made in Wisconsin, a key swing state. Also, these tariffs quickly turned Paul Ryan, who is from Wisconsin, into an anti-tariff person. The effect of the tariffs was to reduce the sale of Harleys in Europe from 44,000 pre-tariff to 27,000 post-tariff. The cheapest Harley is about $13,000 and the most expensive one is about $150,000, so the loss is serious money. The E.U. also put tariffs on bourbon—not because so much bourbon is imported but because it comes from Kentucky, and the E.U. figured that the folks who make it might just have a chat with then-Senate Majority Leader Mitch McConnell (R-KY).
Ursula von der Leyen was recently reelected as the president of the European Commission. She is a big proponent of carefully targeted retaliatory tariffs. But before levying any, she would drag Trump to the World Trade Organization for adjudication. The WTO has no real power, but a loss there would give Trump a black eye internationally and might cue other countries to action.
In addition to tariffs, which are very visible and thus political, the E.U. could erect some technical barriers to trade. These often relate to product safety and product labeling. One dilly is the European deforestation regulation, which requires that imported agricultural and food products, such as wood, palm oil, soya, and cattle, must not be produced in a way that increases worldwide deforestation during their production process. Proving that your product does not cause deforestation is not easy. Nevertheless, it can stop products at the border more effectively than a tariff, and if invoked environmental groups will support the measure, whereas nearly all U.S. industries will oppose above-the-board tariffs.
Another weapon that can be used is procurement. When European governments need some product, they have to put out a request for bids. They can include a requirement that a certain percentage of the product be produced in the E.U. For example, a requirement that airplanes must have 30% or 50% European content would eliminate Boeing from most tenders. There are plenty of other tricks like this available and the E.U. is ready to use them if need be.
China generally doesn't play this kind of game. It just slaps a retaliatory tariff on U.S. products. For example, last time around, China put a tariff on soybeans that resulted in a huge loss to U.S. farmers when soybeans from Brazil became cheaper than American ones, despite the more efficient U.S. agriculture. American farmers lost a huge amount of money, but Trump was able to get Congress to pony up $28 billion in free money to rescue the farmers. With Congress trying to slash the budget now, getting enough votes in the House to bail out farmers again might not be so easy. (V)