US-EU Trade War: When Economics Becomes a Tool of International Security

By Rosalia Perna

On January 20, in a speech heavy with nationalist rhetoric and defiance of multilateralism, President Donald Trump marked the beginning of his second term by reiterating a familiar promise: to put “America first” in global trade. But the substance of his new approach suggests a significant shift. While his first term was characterized by a focus on shielding American manufacturers from Chinese competition, his second-term priorities appear more focused on reinforcing the power of U.S.-based multinational corporations—often at the cost of long-standing allies, including the European Union.

The implications for Europe are both economic and strategic. EU leaders now face the urgent task of responding to a U.S. trade policy that no longer simply disrupts global trade rules but actively exploits their erosion. In this environment, the line between economic security and national security is increasingly blurred.

From Bilateral Tensions to Global Realignments

The first Trump administration aggressively challenged China with tariffs, sanctions, and export controls. While many European officials sympathized with concerns about Chinese state subsidies and intellectual property theft, they were wary of the U.S.'s go-it-alone approach. Now, however, Washington’s economic ire has turned toward Europe itself.

Recent tariff hikes on European steel, automobiles, and agricultural goods have been justified on national security grounds, raising eyebrows even among close transatlantic partners. Additionally, new subsidies under the “America First Industrial Act” prioritize U.S.-based firms, discouraging foreign investment and triggering fears of a subsidy race.

Rather than recalibrating after the turbulence of the 2020s, the Trump administration is doubling down on economic nationalism—this time with a more polished strategy and deeper corporate backing. The target is no longer just Beijing, but any nation seen as competing with American economic supremacy. That includes Europe.

Tariffs and the Breakdown of the Global Trade Order

Since 2020, the global trade order has become increasingly dysfunctional. Many members of the World Trade Organization (WTO), including the U.S., have openly flouted rules regarding tariff ceilings and trade dispute resolutions. The effective paralysis of the WTO’s appellate body, largely due to Washington’s refusal to appoint new judges, has stripped the system of its enforcement mechanism.

This breakdown has allowed protectionist policies to proliferate under the guise of strategic necessity. Tariffs, once regarded as a last resort, have become standard tools of economic policy. While such measures can provide temporary relief to domestic industries, they also drive up consumer prices, reduce market efficiency, and risk igniting retaliatory spirals.

In the U.S., these policies have enjoyed popular support—particularly in economically distressed regions where job losses are often blamed on global competition. However, the broader economic consequences—higher inflation, decreased purchasing power, and weakened international cooperation—are now becoming apparent.

Europe’s Strategic Dilemma: Unity or Fragmentation?

In Brussels, the Trump administration’s renewed economic aggression has intensified internal debates over how the EU should respond. Some member states, particularly those with strong trade ties to the U.S., favour a conciliatory approach, emphasizing dialogue and cooperation. Others, including France and, increasingly, Germany, argue that the EU must push back with coordinated countermeasures and an assertive industrial policy of its own.

The options on the table include targeted tariffs, increased investment in strategic industries, and legal challenges via remaining WTO mechanisms. More broadly, there are growing calls for the EU to pursue "strategic autonomy"—reducing reliance on both the U.S. and China in areas such as semiconductors, green technology, and pharmaceuticals.

But European unity on these issues is fragile. Differing national interests, economic structures, and political ideologies make it difficult to forge a common stance. Without it, however, the EU risks becoming a passive actor in a world increasingly defined by economic coercion.

Economic Security as the New Geopolitical Battleground

This moment marks a deeper turning point in how global power is exercised. No longer confined to traditional military and diplomatic channels, geopolitical influence is increasingly asserted through trade policy, technological standards, and financial networks. The U.S. is not alone in this. China has long pursued geoeconomic strategies through the Belt and Road Initiative, while countries like India and Brazil are beginning to follow suit.

For the EU, this shift demands a rethinking of its place in the world. Defending open markets is no longer just an economic concern—it is a question of sovereignty and global relevance. Without robust tools to assert its interests, the Union risks being squeezed between two superpowers that play by different rules.

To thrive in this new era, the EU must invest in technological innovation, deepen internal cohesion, and diversify its global partnerships. Trade agreements with Africa, Latin America, and Southeast Asia could provide vital alternatives to the current dependency on the U.S. and China.

A Personal Reflection: The Risk of Becoming Comfortable in Crisis

As someone who has covered transatlantic relations for over a decade, I’ve seen cycles of tension come and go. But this feels different. The second Trump administration is not simply rewriting trade policy—it’s challenging the very notion of cooperative global governance. What’s more worrying is that Europe still seems unprepared to confront this new reality.

There is a danger in becoming too accustomed to crisis. In recent years, the EU has weathered Brexit, a pandemic, and an energy crisis. Each time, it has muddled through, adapting incrementally but rarely acting boldly. This moment demands more. If Europe fails to respond with strategic clarity and political will, it won’t just lose economic ground—it will lose the ability to shape the rules of the game.

And once those rules are written without you, getting back to the table is far harder than being there in the first place.