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https://www.wsj.com/politics/policy/us-europe-trade-relations-849fe23a
‘What the Hell?’ Europe Chafes at America’s
Protectionist Tilt
After the Biden administration echoes Trump’s restrictive trade views, European
officials worry the U.S. isn’t what it used to be; ‘The honeymoon is over’
By Andrew Duehren
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and Kim Mackrael
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Jan. 29, 2024 12:01 am ET
President Biden’s 2021 declaration that “America is back” was welcomed by European officials
eager to move past their trade troubles with the Trump administration.
Yet instead of reversing policies driven by Donald Trump’s protectionist view, Biden has
advanced many of them. The president has kept trade barriers in place, left European
companies out of subsidies designed to bolster U.S. manufacturing and surprised allies with
tighter restrictions on Chinese access to American technology.
Many Europeans fear that Trump, seemingly en route to the Republican nomination, might
abandon Ukraine and the North Atlantic Treaty Organization, as well as inject chaos into
global trade. They have nonetheless come to believe that regardless of the winner of the
expected Biden-Trump rematch, U.S. economic policies have tilted from their favor. “The
honeymoon is over,” one European diplomat said.
Diplomats and officials across Europe are wondering whether the bloc can rely on the U.S. to
continue backing the rules-based trading system—or if they face the possibility of economic
conflict between the longtime allies.
The EU has taken some steps to support its own domestic industries, relaxing some of its
subsidy rules to make it easier for European governments to compete with U.S. cleantechnology incentives. But EU officials still largely cling to traditional free-trade ideals,
hesitant to embrace a U.S. approach they say reminds them of tactics favored by Beijing.
European officials have warned Washington that U.S. moves to compete with China are
creating collateral damage across the Atlantic.
“We are an old couple, and we have our issues,”
Olivier Becht, the French foreign trade minister at
the time, told U.S. Trade Representative Katherine
Tai last month during a visit to Washington,
according to people familiar with the exchange. “But
we should be careful to manage our trade
differences.”
The next U.S. president will have to navigate a
surplus of thorny economic debates to keep the
marriage intact. Each issue could spark diplomatic
tussles, tariffs or other trade restrictions and
weaken economic unity between the U.S. and
Europe. Concern over Moscow’s belligerence and
China’s economic might have so far made Europe
reluctant to push back harder against the U.S., which
is seen as the West’s strongest leader.
Senior Biden administration officials dismiss the
idea that their agenda has created a rift with Europe,
saying the two allies are aligned on key strategic
questions. A Trump campaign spokesman didn’t
respond to a request for comment.
Valdis Dombrovskis, the EU trade commissioner,
said the Biden administration and EU officials have
worked effectively together, including on trade spats
inherited by the White House, but he had hoped for
greater flexibility.
‘What the hell?’
Brendan Boyle, a Democratic congressman from
Pennsylvania, attended the 70th anniversary
celebration for NATO in 2019. At the party in London, he said, there was a sense that the
alliance might not survive much more of then-President Trump’s criticism of the alliance,
focused on the demand that Europe spend more on its own defense.
“The joke that kept getting repeated, and this was gallows humor, was, ‘Well, let’s enjoy this
party because there’s a real question of whether we’ll have a 75th anniversary party,’ ” Boyle
said.
Then-President Trump at a 2019 gathering of NATO leaders in Watford, England, including Britain’s former Prime
Minister Boris Johnson, left, and NATO Secretary-General Jens Stoltenberg, pointing. PHOTO: FRANCISCO
SECO/ASSOCIATED PRESS
Biden quickly re-embraced NATO after taking office in 2021, and he cheered the expansion of
the alliance after Russia’s invasion of Ukraine a year later. His commitment to European
security gave leaders hope that the U.S. had pivoted.
They were disappointed to learn that in matters of international economics, Biden shared
some of Trump’s worldview. The president and his advisers have cast unfettered global trade
as a national-security threat, warning that it has hollowed out the U.S. industrial base,
harmed American workers and allowed China to dominate important industries.
One early test for the Biden administration was how to address the tariffs Trump slapped on
European steel and aluminum. The president suspended them after he took office. But he
didn’t permanently end the duties on metals, imposing more modest fees that nonetheless
cost European metal exporters hundreds of millions of dollars last year.
European leaders sought repeatedly to persuade Biden to kill the tariffs. In October, Ursula
von der Leyen, the president of the European Commission, European Council President
Charles Michel and other EU officials arrived in Washington for a summit, where they had
hoped to put the issue to bed.
In talks ahead of the summit, U.S. officials had pushed for the EU to impose tariffs on Chinese
metals as part of a deal, a step some Europeans worried might violate World Trade
Organization rules. The night before the White House meetings, EU diplomats reviewed a
proposed joint statement, which was the product of last-minute negotiations between the U.S.
and the bloc’s executive arm. After review, some of the diplomats said the statement sounded
like the bloc would be willing to back those tariffs as part of an eventual deal.
“There was just a barrage of member states going, ‘What the hell?’” one European diplomat
said.
The final statement from the summit had just four sentences on the issue, saying the two sides
would keep talking. Dombrovskis later worked with Commerce Secretary Gina Raimondo to
try to blunt the impact of the remaining duties. In December, the tariff suspension was
extended for another two years.
European Commission President Ursula von der Leyen speaking at a White House meeting on Oct. 20
last year. PHOTO: EVAN VUCCI/ASSOCIATED PRESS
Battery power
At the same summit, the U.S. and EU also tried to move beyond simmering frustration with
Biden’s Inflation Reduction Act. The legislation showered clean-energy industries with tax
breaks, seeking to lure foreign companies to open factories in the U.S. and buy local materials.
The provisions put the force of the American tax code behind Trump’s demands as president
for companies to set up shop in the U.S.
European leaders welcomed America in the fight against climate change. But they worried the
law would put their own clean-energy industries at a disadvantage and lure investment
money away from the EU.
During a state dinner at the White House a few months after Biden signed the bill into law,
French President Emmanuel Macron confronted Sen. Joe Manchin (D., W.Va.), the author of
much of the law. “You’re hurting my country,” Macron said, according to people familiar with
the exchange.
Europeans didn’t like the conditions attached to a U.S. tax credit for buying a new electric
vehicle: Americans can’t receive the $7,500 credit unless the car is assembled in the U.S.,
Mexico or Canada. Much of the car battery must also include minerals and parts from the U.S.
or one of its free-trade partners, an attempt to break China’s hold over the global minerals
industry.
Europe doesn’t have a free-trade agreement with the U.S., which Manchin has said he didn’t
know when he wrote the provision.
Early last year, German Chancellor Olaf Scholz complained to Manchin that the U.S. subsidies
hurt the German auto industry. Manchin was dismissive. On his phone, he presented a search
result to the German leader that showed EU auto tariffs were higher than U.S. levies,
according to a person familiar with the exchange. A German government spokesman declined
to comment on the content of the conversation.
The Hyundai Motor Group electric-vehicle and battery manufacturing plant under construction in
Ellabell, Georgia. PHOTO: STEPHEN B. MORTON/BLOOMBERG NEWS
The Biden administration launched talks last year for a new trade deal on minerals that might
help European battery producers qualify under the subsidy’s rules. Those conversations have
since bogged down, but Biden administration officials say they have helped ease European
concerns about the Inflation Reduction Act.
“Yeah, there’s a certain amount of bitching, but I think in reality what it’s done is spurred
action,” John Podesta, the White House official leading work on the subsidies, said in October.
U.S. and EU officials are meeting Tuesday in Washington for a gathering of the Trade and
Technology Council, a forum initiated during the Biden administration to help the allies
coordinate on trade, economic and technology issues. The group plans to discuss clean
technology and artificial intelligence, among other topics, but no action is expected, an EU
official said.
Pandora’s box
The U.S. and Europe in both Trump and Biden administrations have haggled with global
leaders over international rules to prevent tax evasion that have been approved by the EU. To
enforce the minimum tax on multinational firms, European countries could hit U.S. companies
with new levies. Republicans in Congress are threatening to slap taxes on European
companies in retaliation.
“If people go down that route, it just opens Pandora’s box,” said Rep. Ron Estes (R., Kan.). He
and other Republican lawmakers traveled to Paris in September to warn French finance
minister Bruno Le Maire against carrying out the deal. Le Maire rescheduled the meeting and
then said he couldn’t speak with the group, according to people familiar with the meeting. A
spokeswoman said Le Maire was out of the country and that the GOP lawmakers met with his
staff.
If the tax deal breaks down, Europeans are threatening to impose new digital-services taxes
on American tech companies for work they do in the EU, a levy that has angered U.S. officials.
“We should have a credible threat on the table,” said Paul Tang, a Dutch member of the
European Parliament who chairs a tax committee.
On the campaign trail, Trump is floating a 10% tariff on all imports. Christine Lagarde, the
head of the European Central Bank, said in a French TV interview that Trump’s re-election
was “clearly a threat” to Europe, citing tariffs and the former president’s attacks on NATO.
A worker controlling a ladle in the electrolysis shop at the Aluminum Dunkerque SAS smelter in Dunkirk, France.
PHOTO: NATHAN LAINE/BLOOMBERG NEWS
Although the Biden administration has been protectionist and trade-skeptical, it shares an
interest in addressing climate change with the EU, said Pascal Lamy, a former EU trade official
who led the WTO from 2005 to 2013. Trump has threatened to scrap the Biden climate
agenda.
The Biden administration also worked closely with the EU on Russian sanctions after the
invasion of Ukraine and helped U.S. companies get liquefied natural gas to Europe when it
faced an energy squeeze from Russia.
Many Europeans say what they most fear from a Trump election win is the possibility of the
U.S. abandoning Ukraine, and Russian forces moving to their doorstep.
“A breakdown in the trans-Atlantic relationship would leave the world even more divided and
strengthen the authoritarian challenge to the rules-based world order we’re seeing from
Russia and, increasingly, China.” said Erik Brattberg, of the Atlantic Council, a nonpartisan
think tank in Washington.
Write to Andrew Duehren at andrew.duehren@wsj.com and Kim Mackrael at
kim.mackrael@wsj.com