OPINION
As the Trump Trade Battle Nears, the EU Would Be Better Served Buying More U.S. Goods; Welcoming U.S. Investment; Ceasing Attacks on American Companies.
President Donald J. Trump is quite unhappy with the European Union and its trade practices.
"They don’t take our cars, they don’t take our farm products, they don’t take anything. And so, we’re not going to have it with them either," he said during his Jan. 7 Mar-a-Lago news conference in Palm Beach, Florida.
Actually, the EU does take something quite valuable from the U.S.: tens of billions of dollars in cash that it confiscates via arbitrary and capricious fines from innovative companies.
The EU accelerated this process during the Biden administration and is licking its predatory bureaucratic lips to go for much more under President-elect Trump.
Since 2018, the EU has imposed fines of $24.2 billion against prominent U.S.-headquartered companies.
While Europe is a wasteland for technical innovation, its bureaucrats have devised clever new and largely undetected trade weapons: laws like the Digital Markets Act, which took effect in 2023, and the Digital Services Act, which went fully into effect in 2024.
These demand U.S. tech companies open their platforms to European competitors and otherwise make changes to appease the interests of the European Commission, the EU’s governing body.
Companies that violate the DMA are liable for fines up to 10 percent of total global revenues. For the DSA, it is 6%. For just five of America’s large tech companies that are targeted by these laws — Amazon, Apple, Alphabet, Microsoft, and Meta — this means total potential annual fines of $281 billion.
This has the potential to both enrich the EU and put our economy into a tailspin.
In this context, the previous fines seem rather modest and a trial run for the staggering sums the EU is now poised to grab.
And there are a host of other similarly onerous laws as well, including the EU AI Act, Corporate Sustainability Due Diligence Directive, and the General Data Protection Regulation.
These impact many more companies.
Such fines would cripple these companies, put a stranglehold on U.S. innovation, and lead to a dramatic plunge in stock prices.
It would also give technological supremacy to China.
So, while it is unlikely the EU will go for such an audacious. $200 billion or so cash grab soon, or all at once, the specter of doing so allows for audacious regulatory attacks and demands.
The costs from regulatory compliance and business uncertainty place a drag on U.S. companies at a time when it is in the national interest for them to drive technological change in AI and elsewhere to power U.S. economic growth.
The EU is operating from a position of technological weakness and would be better advised to cultivate relationships with US tech companies.
Mario Draghi, former head of the European Central Bank, addressed the European Parliament on this on Sept. 17, 2024.
He noted that in 2021, EU companies spent around $320 billion less on R&D than their counterparts "largely because we have a static industrial structure dominated by the same companies and technologies as decades ago."
He also said, "The core problem in Europe is that new companies with new technologies are not rising in our economy. In fact, there is no EU company with a market capitalization over EUR 100 billion that has been set up from scratch in the last fifty years."
In this context, the potential for the EU to seize even larger amounts from US companies appears particularly troubling and tempting and certainly not out of the question.
President-elect Trump is right to call out the EU on trade and to focus on this important economic relationship.
Indeed, the EU and the United States have the largest bilateral trade relationship in the world, with $1.5 trillion exchanged in goods and services in 2023, from which the US had a $57 billion debt.
The EU’s attack on U.S. companies must be part of a broader negotiation that the U.S. has over economic and even national security, such as NATO concerns.
While trade disputes with Canada, Mexico, and China are now at the forefront, the showdown with the EU will have profound and lasting consequences. The EU will be best served by purchasing more U.S. goods, welcoming U.S. investment, and to cease and desist from attacks on U.S. companies.
Paul Steidler is a Senior Fellow with the Lexington Institute, a public policy think tank based in Arlington, Virginia.