Davos, Switzerland — The return of Donald Trump to the White House has sparked a renewed vigor in the European Union’s trade strategy, which had been relatively stagnant for years. European Commission President Ursula von der Leyen and her trade chief Maroš Šefčovič wasted no time in ramping up efforts to finalize long-stalled trade agreements in response to Trump’s electoral victory in November.
During a recent address at the World Economic Forum in Davos, von der Leyen emphasized,
“Europe will continue to advocate for cooperation, not only with our long-standing friends who share our values but also with all countries with whom we have common interests.”
This statement came less than 24 hours after Trump’s inauguration.
Shifting Trade Dynamics
In her first term, von der Leyen had attempted to link human rights and environmental standards to trade agreements, but this approach often exceeded what partner nations were willing to accept. A notable example was a planned trip to finalize a trade deal with Latin America, which was abruptly canceled. Similarly, a long-anticipated agreement with Australia fell through when EU officials traveled to sign a deal that never materialized.
These setbacks highlighted the unrealistic nature of von der Leyen’s ambitious trade goals during her initial term. However, a shift in mindset became evident in the weeks leading up to Trump’s inauguration. Šefčovič noted at Davos,
“My view for the past two months, and I think this has been very clearly confirmed here over the last two days, is that there is a substantial interest in accelerating free trade negotiations with the European Union.”
Recent Developments in Trade Agreements
Although Trump has yet to implement his threats of imposing tariffs ranging from 10% to 20% on various products, the mere prospect has galvanized action within the EU. An anonymous European diplomat stated,
“Trump is inadvertently facilitating trade agreements between the EU and third parties. There is a change of mindset, a new dynamic.”
In December, after two decades of negotiations with South American Mercosur countries, the European Commission reached a political agreement. This includes a provision allowing parties to seek compensation for losses resulting from stringent European regulations, such as those aimed at combating deforestation—an unprecedented move for an EU trade agreement.
Just days before Trump’s inauguration, Brussels also agreed to enhance its trade deal with Mexico, which had been stalled for years. The prospect of U.S. tariffs on Mexican goods prompted both parties to unite in their negotiations. However, EU officials acknowledged that the updated agreement was “less ambitious” than previously planned, a concern that other trading partners might rush to finalize deals with Mexico, potentially sidelining the EU.
As the EU seeks to solidify its trade relationships, it has made notable strides in expanding agreements with Switzerland and resuming talks with Malaysia, which had been dormant for a decade. von der Leyen is set to lead a mission to India next month, aiming to strengthen strategic partnerships and advance slow-moving discussions on a trade agreement.
However, the EU’s ambitions are complicated by significant disagreements between its two largest economies, France and Germany. These differences particularly manifest in their divergent stances on Mercosur and the Commission’s tougher approach toward China, exemplified by tariffs on imports of Chinese electric vehicles.
Friedrich Merz, a Christian Democrat who may become Germany’s next chancellor, is advocating for expedited trade deals that do not require ratification from all 27 EU member states. He has also suggested resuming negotiations for a long-stalled transatlantic free trade agreement, a move that may not align with the views of French President Emmanuel Macron, who has faced electoral setbacks and lacks a stable majority in Parliament.
As the EU navigates this complex landscape, von der Leyen and Šefčovič face their greatest challenge: the implementation of Trump’s proposed tariffs and how best to address them. João Vale de Almeida, a former EU ambassador to Washington, advises,
“We need to engage early, but without appearing desperate. We must not appear needy.”
He stresses the need for a dual offensive and defensive strategy as they move forward.
This evolving trade dialogue signals a significant shift for the EU, as it responds to the changing political landscape and seeks to enhance its global trade standing.