{"id":35439,"title":"How to Survive a Trade War: A Case for EU Burden-sharing","link":"https:\/\/bst-europe.eu\/de\/economy-security-trade\/how-to-survive-a-trade-war-a-case-for-eu-burden-sharing\/","date":"9. Mai 2025","date_unix":1746794942,"date_modified_unix":1747995166,"date_iso":"2025-05-09T12:49:02+00:00","content":"<p>With his sweeping tariff agenda, President Trump has launched a wrecking ball into the global trade order. His partial \u2018pause\u2019 does not change the overall picture. US tariffs pose a major challenge to the EU economy: exports to the US account for 20% of all EU exports, worth \u20ac530 billion or roughly 3% of the EU\u2019s GDP. Yet while the shock is collective, the impact is not. To maintain unity in what could become a prolonged trade conflict, the EU should use the rest of the 90 days \u2018pause\u2019 not just to prepare countermeasures, but to design a fair way to share the burden.<\/p>\n<p>Some member states and industries are far more exposed than others, as shown in the graph below: US-bound exports account for 12.5% of Ireland\u2019s GDP and 3.4% of Slovakia\u2019s, but only 0.53% for Luxembourg and 0.16% for Cyprus. The disparity in exposure also extends to geographically concentrated sectors: politically sensitive, price-sensitive, or easily substitutable products, such as alcohol, food, and consumer goods, are particularly vulnerable to US tariffs.<\/p>\n<div class=\"postContentEmbed\">\n<div class=\"embedContainer\"><iframe title=\"EU trade with the US by member state \" aria-label=\"Stacked Columns\" id=\"datawrapper-chart-HGqew\" src=\"https:\/\/datawrapper.dwcdn.net\/HGqew\/4\/\" scrolling=\"no\" frameborder=\"0\" style=\"width: 0; min-width: 100% !important; border: none;\" height=\"545\" data-external=\"1\"><\/iframe><script type=\"text\/javascript\">!function(){\"use strict\";window.addEventListener(\"message\",(function(a){if(void 0!==a.data[\"datawrapper-height\"]){var e=document.querySelectorAll(\"iframe\");for(var t in a.data[\"datawrapper-height\"])for(var r,i=0;r=e[i];i++)if(r.contentWindow===a.source){var d=a.data[\"datawrapper-height\"][t]+\"px\";r.style.height=d}}}))}();<\/script><\/div>\n<\/div>\n<p>&nbsp;<\/p>\n<p>This has political consequences. When Trump threatened to impose 200% tariffs on European wine and spirits in response to retaliatory tariffs on US bourbon, the EU backed off under pressure from France and Italy, the leading exporters. During crisis meetings in early April, EU trade ministers expressed differing views on the severity of the threat and the appropriate response, while Trump&#8217;s preference for bilateral meetings with national leaders risks allowing national interests to override a coordinated EU approach.<\/p>\n<p>The underlying institutional setup amplifies this political dimension. While trade policy is centralised, the EU lacks a common fiscal instrument to support those hardest hit. So far, economic responses have been national, with Spain announcing a \u20ac14 billion umbrella against the impact of tariffs. But, as the economic costs of an unfolding trade war rise, not all countries will be able to afford such measures.<\/p>\n<p>Relying on uncoordinated national responses risks distorting the level playing field of the Single Market. It also increases the likelihood that governments unable to shield their industries will prioritise national sensitivities over a coordinated EU response. It is no coincidence that Italy, with limited fiscal space and concentrated export exposure, has been among the more reluctant voices when it comes to responding forcefully.<\/p>\n<p>A European burden-sharing mechanism compensating those most affected by trade disruptions, as proposed by Spain, would bolster the EU\u2019s unity and strengthen Brussels\u2019 hand in talks with Washington. Doing so would, however, come with its own complexities: design, financing and moral hazard.<\/p>\n<p>There is precedent for such a mechanism. The economic impact of Brexit was unevenly distributed, with Ireland and the fishing sector among the hardest hit. The EU responded with the Brexit Adjustment Reserve (BAR), a \u20ac5 billion fund designed to support those regions and sectors most affected.<\/p>\n<p>Today, however, the EU faces significantly higher costs, which it must confront with a largely inflexible budget. Madrid has floated the idea of using the proceeds from possible EU counter-tariffs to finance such an instrument. While politically appealing and intuitively sensible, this faces structural barriers. Customs duties flow into the EU budget but do not create additional spending capacity. Instead, any unexpected revenue simply reduces member states\u2019 national contributions.<\/p>\n<p>In the immediate term, the EU could deploy the limited resources still available \u2014 including funding under the Flexibility Instrument, the Globalisation Adjustment Fund, and any remaining budgetary margins \u2014 to offer initial support to sensitive, disproportionately affected sectors. Additional flexibility could come from allowing member states to tap into the crisis reserve within the Common Agricultural Policy and using the mid-term review of cohesion policy to allow for targeted support.<\/p>\n<p>Still, the scale of the challenge far exceeds what these limited EU resources can deliver. To respond effectively and equitably, the EU will need to be more creative. Some initial avenues it could explore: First, EU state aid rules could be adapted to enable targeted national support without undermining fair competition. Second, the EU may apply regulatory flexibility \u2014 for example, by easing sector-specific rules \u2014 to relieve pressure on exposed industries. Third, the EU should consider the trade war\u2019s uneven impact and aim to distribute the economic burden when designing countermeasures. All of this must be underpinned by rigorous analytics. Here, expanding the recently announced \u2018import surveillance task force\u2019 to systematically track the impact of trade disruptions could help.<\/p>\n<p>These measures, however, come with an important caveat: moral hazard. If countries and industries are effectively bought out of their trade concerns, there is a strong incentive to exaggerate losses, or worse, to attach a price tag to their support for common EU positions. The EU will thus have to tread a fine line between targeted compensation and opening a Pandora\u2019s box of demands.<\/p>\n<p>A transatlantic trade spat will put the EU to the test, both politically and economically. A well-measured dose of practical solidarity would help to weather the storm.<\/p>\n<p><strong>About the authors<\/strong><\/p>\n<p>Etienne H\u00f6ra is a Project Manager at the Bertelsmann Stiftung.<\/p>\n<p>Arthur Leichthammer is a Policy Fellow at the Jacques Delors Centre.<\/p>\n<p>Aslak Berg is a Research Fellow at the Centre for European Reform.<\/p>\n<p><strong>Read more about trade<\/strong><\/p>\n<p><a href=\"https:\/\/bst-europe.eu\/europes-future\/trumponomics-how-the-eu-may-respond-to-us-trade-policy\/\" target=\"_blank\" aria-label=\"\u00d6ffnet in einem neuen Tab\" >Trumponomics: How the EU May Respond to US Trade Policy<\/a><\/p>\n<p><a href=\"https:\/\/bst-europe.eu\/europes-future\/mineral-resources-and-china-europes-commodity-trap-and-the-urgent-need-for-reform\/\" target=\"_blank\" aria-label=\"\u00d6ffnet in einem neuen Tab\" >Mineral Resources and China \u2013 Europe\u2019s Commodity Trap and the Urgent Need for Reform<\/a><\/p>\n<p><a href=\"https:\/\/bst-europe.eu\/europes-future\/unstable-grounds-why-trumps-china-policy-cannot-guide-europe\/\" target=\"_blank\" aria-label=\"\u00d6ffnet in einem neuen Tab\" >Unstable Grounds: Why Trump\u2019s China Policy Cannot Guide Europe<\/a><\/p>\n","excerpt":"<p>With his sweeping tariff agenda, President Trump has launched a wrecking ball into the global trade order. His partial \u2018pause\u2019 [&hellip;]<\/p>\n","thumbnail":"https:\/\/bst-europe.eu\/wp-content\/uploads\/sites\/24\/2025\/05\/containers.jpg","thumbnailsquare":"https:\/\/bst-europe.eu\/wp-content\/uploads\/sites\/24\/2025\/05\/containers.jpg","authors":[{"id":35442,"name":"Aslak Berg","link":"https:\/\/bst-europe.eu\/de\/blogger\/aslak-berg\/"},{"id":33645,"name":"Etienne H\u00f6ra","link":"https:\/\/bst-europe.eu\/blogger\/etienne-hora\/"},{"id":35445,"name":"Arthur Leichthammer","link":"https:\/\/bst-europe.eu\/de\/blogger\/arthur-leichthammer\/"}],"categories":[{"id":596,"name":"Economic Security &amp; Trade","link":"https:\/\/bst-europe.eu\/category\/economy-security-trade\/"}],"tags":[{"id":202,"name":"eu","link":"https:\/\/bst-europe.eu\/tag\/eu\/"},{"id":263,"name":"European Union","link":"https:\/\/bst-europe.eu\/tag\/european-union\/"},{"id":220,"name":"tariffs","link":"https:\/\/bst-europe.eu\/tag\/tariffs\/"}]}