The morning after Donald Trump announced near-blanket tariffs on global trade, Ursula von der Leyen was thousands of kilometres away from her Brussels office.
The head of the European Commission, the EU’s powerful executive arm leading its response to Trump’s tariff upheaval, was in Samarkand, Uzbekistan, for talks with the leaders of several central Asian states, to build up the region’s links to Europe. The intended messaging was obvious: If the US doesn’t want to do business with its traditional allies, the EU is happy to find other partners.
It was a theme von der Leyen returned to this week. “We will focus like a laser beam on the 83 per cent of global trade that is beyond the US,” the commission president said. That could mean future trade deals between the EU and India, Thailand, Malaysia or Indonesia, she said.
Senior officials in the commission remain hopeful the union will be able to strike an agreement with the White House to head off a major trade war. There is a feeling that tanking stock markets will put some pressure on Trump to about-turn.
In typical chaotic fashion, on Wednesday Trump announced a 90-day pause on his “reciprocal” tariffs put on most countries last week, while at the same time raising duties on China.
This came hours after the EU had signed off on a limited package of counter-tariffs. US exports of soybeans, motor-powered boats, denim jeans, oranges and a host of other goods sold to the EU will be hit. All in, these retaliatory import duties will hurt about €21 billion worth of trade coming from the US to the EU.
Trump’s tariffs, first slapped on imports of steel, then cars, and last week practically everything else, would hit €380 billion in goods that EU states sell across the Atlantic.
The US president has talked about going even further and putting tariffs on pharmaceuticals, one of the few industries not covered by his “Liberation Day” trade levies. It remains to be seen how long his pause will hold.
If Trump does not back down, his tariffs will make it more expensive for practically all EU businesses and industries to sell their products to the US market.
In the search for new friends to trade with, the European Commission first turned to South America, where it hopes to finally get a long-stalled deal over the line.
The proposed trade agreement between the EU and the Mercosur bloc of Brazil, Argentina, Uruguay and Paraguay has been a source of controversy. Irish farmers fiercely oppose the deal because they fear it will lead to Irish beef being undercut by cheaper South American competition on supermarket shelves.
One month after Trump’s election last November, von der Leyen travelled to Uruguay’s capital Montevideo to finalise the agreement, 25 years after negotiations started.
[ Q&A: What is the Mercosur trade deal and what does it mean for Ireland?Opens in new window ]
However, the Mercosur deal still needs to be approved by EU states, in what will be a contentious vote. France has led efforts to kill the agreement, due to opposition from its own farming sector. Ireland, Poland and Austria have also voiced opposition.
When lawyers have finished going over the details, the final text of the trade agreement will be put to EU states in the next few months.
Berlin and some other capitals point to the big South American markets the deal would open up. They will argue that the breakdown in the transatlantic relationship under Trump means the EU can’t afford to turn its nose up at the Mercosur states.
[ China increases tariffs on US goods, sending Wall Street futures tumblingOpens in new window ]
Spain’s economy minister, Carlos Cuerpo, this week said the EU needed to ratify the Mercosur deal “as fast as we can”, to show Europe was open for business.
Italy is seen as a key swing vote. Giorgia Meloni’s hard-right government would probably need to join the opposition camp to make up a blocking minority big enough to scupper the deal.
Speaking after a meeting of EU trade ministers in Luxembourg, Tánaiste Simon Harris said the Government still had “significant reservations” about the Mercosur deal in its current form.
“Of course we remain willing to talk and engage and to see engagement between farming organisations and the European Commission ... But at the moment the concerns that we have around Mercosur do very much remain,” the Fine Gael leader said.
A new government in Austria seems to have shifted stances. Economy minister Wolfgang Hattmannsdorfer suggested it was now looking at Mercosur in a more favourable light. Austria pivoting to back the agreement would make efforts to block its adoption that much harder for France, Ireland and others.
And what about China? Beijing might be hoping Trump’s destructive tariff agenda will lead to a thaw in recently frosty relations with Brussels. The EU’s instinct at the moment is to keep its guard up.
[ China tariff response could could help EU plot its course with USOpens in new window ]
The commission is worried that when blocked from exporting to the US by exorbitantly high tariffs, China will try to sell its excess steel, and many other products, in Europe on the cheap. The practice, known as dumping, would flood the EU market and undercut domestic producers. Ironically, if that came to pass the EU would probably end up putting its own tariffs on imports coming from China, to protect European industry.
