EU braces for trade spat with US amid defence spending talks

The European Union "can respond to tariff policy with tariff policy," Olaf Scholz told the media in Brussels. During an informal European Council summit, the German Chancellor emphasized that "it is clear that as a strong economic zone, we can shape our future and respond to tariffs."

Scholz appealed for EU countries to cooperate in the face of economic threats from the President of the United States, reminding everyone that both sides benefit from the exchange of goods and services. "If tariff policy makes this difficult, the consequences will be negative for both the US and Europe," he added.

On Saturday, February 1st, Donald Trump imposed tariffs of 25 percent on most goods from Canada and 10 percent on goods from China.

The next day, Canada and Mexico responded by imposing tariffs on the United States (tariffs on Mexico were eventually suspended). Trump called the EU's $322 billion trade deficit with the US a "crime" and announced that tariffs against the Union "will certainly be imposed."

The US is the largest recipient of exports from the European Union. In recent months, the American president has warned Europe that it "must" buy more oil and gas from Americans to reduce the transatlantic trade deficit.

Polish Prime Minister Donald Tusk stated today in Brussels that EU leaders and the EU itself "must do everything to avoid this totally unnecessary and foolish trade war." However, Tusk noted that the EU cannot "lose its common sense" and understanding of where its interests lie, but it also cannot lose "respect for itself."

EU diplomatic chief Kaja Kallas pointed out before the summit that "if Americans start an economic war, the last to laugh will be China," and in a trade war, "there are no winners."

– We are very interconnected. We need America, and America needs us – stated Kallas in Brussels. The Prime Minister of Denmark, Mette Frederiksen, to whom Trump recently became particularly troublesome by persistently suggesting the sale of Greenland, declared that although "not in favour of fighting allies," Denmark will respond in solidarity to tariffs if Americans impose them on the Union.

French President Emmanuel Macron told reporters that if Europe is economically attacked, as "a true power, it will have to fight for itself – and react." He added that recent announcements from the US only push Europe towards greater unity and increased activity in response to common security issues.

The EU summit was initially intended to focus solely on security – not economic, but military, and not defence against American tariffs, but Russian military. In the weekend edition of the newspaper "Bild am Sonntag," before the Brussels meeting, NATO Secretary General Mark Rutte called on Germany to significantly increase defence spending and boost arms production in the face of the growing threat from Russia.

"Let me be clear: we must prepare for war. And the best way to prevent it is to increase defence spending" – he emphasized.

And that is precisely what EU leaders and member states are focusing on in Brussels today. Rutte – former Prime Minister of the Netherlands, well-acquainted with most of the Council and known as one of the few European politicians who had the ear of Donald Trump, is participating in these discussions, as is British Prime Minister Keir Starmer.

The lever labelled "EU defence" was definitively shifted to a higher level of combat readiness in March 2022 at Versailles following Russia's full-scale invasion of Ukraine. The current summit is the first meeting devoted entirely to defence, primarily ensuring funding for the EU's defence industry through mobilizing the private sector and using EU instruments and the EU budget.

A proponent of joint spending – and debts – which would partially fund the defence system "East Shield" built by Eastern EU countries – is Poland. Germany and others have been opposed to such spending so far.

In the background of the Brussels meeting are calls from Trump to EU NATO countries to increase defence spending to 5 percent of gross domestic product. After lobbying for raising these expenditures to 2 percent in his previous term, by 2024, 23 out of 32 member countries had reached this threshold. But for many, 5 percent is too much.

German Defence Minister Boris Pistorius called the American president's demand "unattainable". In an interview with ZDF, he assessed that "we do not need to jump every time Donald Trump commands us."

However, he noted that EU countries will have to exceed Trump's previous demands – namely the aforementioned 2 percent GDP on defence – "in the face of the threat posed by Vladimir Putin." He suggested that it could be between 3 and 4 percent of GDP, which should be spent on the European defence industry.

Where the new EU weapons should come from will also be a topic of discussion – and presumably, disputes. France, which has a strong defence industry, lobbies for EU money – which comes from European taxpayers' pockets – to be spent in Europe. Meanwhile, countries like Poland, Germany, the Netherlands, and the Baltic states are open to purchasing weapons outside the EU, such as Poland, which spends billions on equipment from the US and South Korea – notes the Brussels-based "Politico" service.

Thus, the Brussels summit has three tasks: to develop a joint response to American threats of a trade war, establish a common defence spending policy, and lay the foundation for expanding the EU's defence industry with joint EU funds. Before the summit, Poland and the Baltic countries called for spending at least $107 billion on defence by 2027. In 2023, EU investments in defence reached $76 billion, and in 2024 they exceeded $107 billion.