Navigating the Atlantic is an euradio podcast series produced in partnership with the Chair of Transatlantic Trade and Economy of the College of Europe (in cooperation with Microsoft). As global challenges multiply on numerous fronts – namely security and defence, democracy, trade, climate change and energy among many others – this podcast series aims at navigating the currents underlining transatlantic affairs, to shed light on all dimensions and complexities of this historic partnership. In each episode, journalist Lolla Sauty-Hoyer from euradio welcomes one guest and showcases their personal outlook on the state of transatlantic relations in a fireside-chat-like setting. This series is made possible by the participation of the students of the Master of Arts in Transatlantic Affairs (MATA) program of the College of Europe, who contribute to the preparation of these interviews with their precious expertise.
Today, for the third episode of Navigating the Atlantic, we talk about trade relations between the European Union and the United States. And for that we have a special guest, Michael Koplovsky, visiting professor at College of Europe and the Masters of Transatlantic Affairs. He is also a former US diplomat and trade negotiator. Welcome, Michael Koplovsky, and thank you so much for being with us today. So, as a first question, I would like to ask you: how would you describe the current state of Transatlantic trade relations under President Trump's second term so far?
Sure, Lolla. I would characterize the trade relationship, the relationship between the EU and the United States and Trump's second administration as confrontational. There's a lack of trust, there's suspicion, there does not seem to be the same spirit of cooperation or shared goals and values as we have seen in the past.
It strikes me that less than 10 years ago, we were negotiating a comprehensive trade investment agreement, a free trade agreement between the United States and the EU, and well, we had our differences over specifics, whether it was regulations or agricultural products. But it was not the same kind of threats, counter threats, measures and countermeasures that we are seeing and experiencing today.
I think it is an amazing evolution that this has happened over these 10 years. It is interesting also to note that, in the past, trade wars or trade disputes were often fought over subsidies or tariffs or quotas. And today, I think trade wars have evolved much like regular wars have evolved. We have seen regular wars evolve from conventional wars using tanks and artillery to what we are seeing in Ukraine today with cyberattacks. Today we are going from arguments over tariffs and quotas to involving other issues such as taxes. I find it discouraging that we're not in a more constructive and cooperative phase.
And to what extent are we witnessing a continuity or a rupture with the previous US administration according to you?
So, as I mentioned, previous administrations of the US and the Europeans or the US and the EU have worked together, right? Worked together to build the multilateral trade system as we know it, the WTO (World Trade Organisation), first through many rounds of GATT - the general agreement on tariffs and trade- and then the founding of the WTO. We worked together in the OECD (Organisation for Economic Co-operation and Development) and other international organisations through the G7. Also, we are in agreement about trying to address unfair trade practices around the world. But now, it seems that we are diverging, that there is, as you say, I think you said a ‘rupture’. But I also think there is reason for hope. Do not forget that the US and the EU as an economy make up a $9.5 trillion transatlantic economy. That is huge. It accounts for one-third of world GDP. And we have bilateral trade which is really quite robust as $976 billion dollars for trading goods, which is, I think, 60% more than the US trades with China. I also think that interdependence is a big part of our economic relationships in our trade. Supply chains, investment on both sides. Europeans are the largest investors in the US. The US is a big investor in Europe. Customers, US companies rely on Europeans to buy their goods, to own their stocks, to invest; and I think that cannot be easily unraveled even at a time when, perhaps, there is more confrontation than cooperation.
To talk about the strategic logic behind US recent trade measures, what do these measures tell us about President Trump's broader trade strategy ?
It is said that these trade measures, these tariffs, are meant to correct trade imbalances, the trade deficits that the United States is experiencing in trading goods with its trading partners. We would like to correct that through tariffs. It is also to revive American manufacturing, bring back quality jobs, bring back industries that have either left the United States or much diminished in the United States.
The Trump administration has said that it would like to raise revenues with these tariffs to pay for some of the tax cuts that are contained in this ‘big beautiful bill’ wending its way through Congress and the Senate right now. It has also been argued that the Trump administration is using these tariffs, and these threats of tariffs, as leverage, and they are used for leverage either in trade negotiations themselves, or in unrelated areas. Do not forget that, actually, the justification for some tariffs against China, Canada and Mexico were related to immigration issues and fentanyl. There was a threat of very high tariffs against Colombia when Colombia would not receive deportees from the United States, and Colombia backed down. It may be that there is some leverage the Trump administration is looking for in Europe for Defence spending or other unrelated issues to trade, that this will help to leverage.
Then finally, and this gets back to our first discussion about the change in tone, there is some anger about some of the EU regulations that have been put in place that seem to unfairly disadvantage American companies, the Digital Markets Act, the Digital Services Act, Privacy Directive GDPR, some of the proposed Digital Services taxes, which would probably put a burden on US companies more so. You know, the White House even talked about ‘extortion’ of American companies by some of these EU moves, in a White House executive order. And then you heard the President say the EU was designed to ‘screw us’. I do not think that is true and I do not think that is necessarily a widely held view in the United States, but it does reflect some of the anger and upset in the United States that was behind some of the logic of these tariffs. I also want people to understand that there is a lot of drama that goes with some of the reciprocal tariffs, the very high tariffs, 30, 40, 50% sometimes against countries like Vietnam and Cambodia. And then, of course, there is a retreat or the threat of very high tariffs against the EU, which is then put on hold after some discussions. But it also hides the fact that there was an across-the-board 10% tariff that the United States has placed on all trade, that remains and then people forget that it is actually quite high. That is enormously high. It is the highest level for generations, I think the quadruple of what our average tariff rate was even weeks or months ago. And then that will remain and there does not seem to be much appetite for removing that basic 10% tariff in addition to all these other reciprocal tariffs. And then we will talk a little bit maybe about the sector specific ones under sections 232, 301 and other trade laws later, perhaps.
According to you, what does the America first trade policy memorandum reveal about President Trump's priorities, especially regarding the EU?
We have an enormous deficit trade, deficit with the EU and with some specific EU members as well, that we are trying to repair. So, that is part of it, right?
There is also this issue of there is a sense that US high-tech companies are being singled out by some of the recent regulations and legislation that apply to these gatekeepers, these very large online platforms -most of which, if not all, are American in nature. There is the extra-territorial application of some of these EU regulations and laws.
And even the Brussels effect, as Anu Bradford has coined the term, that when the EU does regulate or provide some of these standards, they are adopted by other countries around the world or even some US states to the disadvantage of some American players. And I think, for all those reasons, Washington would like to talk to Brussels more about how to resolve some of these issues in the context of bilateral trade discussions.
And do you see these policies as a part of, as we said, a long term America first economic vision or more of a tactical pressure tool and how is it possible for Europe to manage with that?
I think Europe has taken a good approach, which is to remain calm. Do not take the bait. As in, negotiation theory tells you that, when your negotiating partner tries to become emotional or put energy into the negotiations, you go to the balcony, you take a step back, you keep your cool, remain factual and dispassionate and you remove emotion from the context because negotiators are trying to get you to be emotional. I think the EU is also trying to seek a deal, making attractive offers such as purchase of US LNG (liquefied natural gas) or coming to the table about certain aspects of the US tasks, the US demands and these things, trying to address US interests and satisfy Trump administration needs or desires. I think on a couple of the ones that I have mentioned, the EU regulations on things like artificial intelligence (AI), digital services or digital markets… The EU is probably not that interested in changing its global regulations to satisfy or please the US. I think also, the EU is not just being offering constructive ways to resolve this, as I mentioned, but also is prepared to respond or react in kind, right? They have already prepared a list of items to put tariffs on in response to the aluminum and steel tariffs that were put in under section 232. The anti-coercion mechanism that the European Union has put together, do not forget, was originally designed in response to the first Trump administration and fears of how they would have to respond, how you would have to respond to US trade confrontations.
And it contains, I think, a lot of items that the EU will be prepared to look at whether it is government, it is regulation, it has to do with IP protection. There are other areas that are part of the ACI, this anti-corruption instrument that the EU could bring to the table to respond to this.
And I think that this calm, dispassionate and constructive approach that I've seen from the commission up till now is quite good. But also, they are ready for a trade war, should it come to confrontation.
And how unified are EU member states in their response to US pressure? Are there any signs of national diverging strategies? I am thinking, for example, of Georgia Meloni's recent visit to the White House. Does this kind of trip have an impact on the EU ability to present a unified trade front?
It strikes me that the EU does present the united front to Washington. And I even think that Georgia Meloni even said during her visit to the White House that she does not speak for the EU on trade. And then she invited President Trump to come to Rome to meet with EU officials to talk about this, not that she as Italy would be able to speak for them. And there has been coordination, I think, among member states on what to do.
The commission has sought a mandate from the member states, for example, on the response to the aluminium and steel tariffs and got approval for that. It strikes me that the EU actually has a clear mandate from the member states and trade has always been an exclusive commission competence, right? It is part of the history of the EU that trade has always been in Brussels, that the Commission speaks for the entire European Union on trade, as given permission by the member states. And I think that it is Commissioner Šefčovič (EU Commissioner for Trade and Economic Security; Interinstitutional Relations and Transparency) who really does speak for the entire EU when he speaks to Ambassador Greer (U.S. Trade Representative) or Secretary Lutnick (US Secretary of Commerce) or Secretary Bessent (US Secretary of the Treasury) on some of these trade issues.
To talk about the impact on key sectors and transatlantic business, can you please remind us of which sectors are most exposed to these escalations in tariffs? And in a context of global economic uncertainty, how resilient is the transatlantic trade partnership?
When I think about the impact on particular sectors, I am far more worried about the specific tariffs that are going to come about as a result of section 232, which is a part of US law that investigates whether there has been a threat to national security or some sort of amount of trade that is harmful to the United States.
And once an investigation and termination has been made under this, first of all, it is on a far stronger legal basis than the broad reciprocal tariffs that were announced on Liberation Day in early April. So, these will stick and, in fact, the aluminum and steel tariffs that I mentioned are already in place under this, as our tariffs on automobiles and auto parts. And so those sectors are already affected, I think, in Europe.
But don't forget, there is still other major sectors that are under investigation that we should hear a determination on by the end of the year, possibly as soon as the summer, and certainly by the end of this calendar year. On things like timber and lumber and products made of wood, on heavy trucks, on aircraft and jet engines, on copper, on pharmaceuticals and the ingredients in pharmaceuticals. I think pharmaceuticals is a particularly sensitive area for Europe, particularly vulnerable. US and European pharmaceutical companies have created supply chains and production methods and processes where different parts of drugs and pharmaceuticals are produced in different places and then brought together not either in America or Europe or even in other countries. And that these supply chains that have been established over time, I think are going to be in trouble. Especially countries like Belgium, Ireland, Denmark, I think that are very dependent on these exports of pharmaceutical products. Just to give you an illustration, I read recently that all Botox -Botox is this drug that gets away wrinkles and faces of some, I should not say just women, men and women use that- it is all made in one town in County Mayo, Ireland.
So, if they were to put a big tariff on this pharmaceutical and Botox, like the Botox would be very expensive and unavailable, and I do not know what the result of that would be in the United States. I am not sure if women or men who use Botox would be very pleased to learn about that.
I will say, though, that I observe that Europe has responded to these threats to these particular key sectors by redoubling efforts to pursue bilateral free trade and trade liberalization, right? For example, they completed the EU-Microsoft agreement in December, and there seems to be a big push to get it ratified, maybe even this calendar year, if the Danish presidency is ambitious enough.
They are turning to putting more effort into trade agreements with Southeast Asian countries, like Malaysia, Indonesia, Philippines, Thailand, and talks with India and Australia are ongoing. Europe is very much looking at how to build a network of countries that share this idea of liberalized trade and with rules and processes that can be agreed.
Even at the WTO, we are seeing the EU as a leader or participates at least in leading this building of coalitions of the willing to move forward as the WTO gets bogged down, I think, in some dysfunction. There seems to be some countries, like many countries, coming together, what we used to call ‘variable geometry’ here in Brussels, when certain EU members get together to decide on a particular policy, we're seeing that now in Geneva at the WTO, right?
For example, the joint statement initiative JSI is 71 countries who are agreeing on e-commerce measures even though the United States has decided not to become involved, and of course more than half of WTO members as well.
Also, the US has actually blocked the dispute settlement mechanism by not allowing members of the panels to be named and so there was no way for there to be WTO dispute resolution but the EU and others have put together something called MPIA, the Multi-party appeal arbitration agreement or something like that. And this gets around the blocking by allowing countries that would agree to use this process to solve their trade disputes under the WTO.
I think it is encouraging that this is happening and there has even been talk of expanding the transpacific partnership to include other countries. I know the UK has already joined. I do not know whether the EU will, but certainly there will be building relationships and building greater and greater groups of countries that are interested in a rules-based international trading system, liberalisation, a common rule book for trade.
And then if, in fact, this turns out to be a phase, as you proposed at the beginning of the conversation, and the United States comes back to wanting to participate, perhaps there would be a place for the United States at some of these tables and to move on from them.
Maybe just one last question to conclude with all we already said. Would you say that there is still space for meaningful trade negotiation between the EU and the US at this point?
I think that the United States, in the end, wants deals, right? Wants a deal.
I think the United States was very happy to see the framework of the deal that was negotiated with China, which by the way included elements about student visas and critical minerals, to talk about non-trade related issues. I think you would like to see some sort of other deals with other major trading partners. The EU has come to the table, I think, and is interested in negotiating, but must also admit that things like the DMA, DSA, other technological regulations, you know, just proportionally affect US companies.
It seems like digital service taxes are targeting US companies. I think there needs to be a way to address this anger in the United States about how data privacy tax regulations are perceived. But ultimately, I think, as we said at the beginning, coming full circle, Europeans and Americans do share values, do share outlook. We agree on the economic and commercial threat posed by China, I think.
I think that we both want to respond to the fact that these unfair practices are hurting our economies and hurting our businesses, unfair subsidies, and trade practices. China and other countries have a different vision for economic management than we did. I think there are also areas for a corporation which are not immediately evident perhaps.
For example, under the Trade and Technology Council, the TTC, we had enormous success in coordinating on sanctions against Russia after the invasion of Ukraine and the continued war there, on cyber security, on energy security issues. I think there are areas where the United States and Europe could actually find common cause and agreement.
And I think we should maybe look at discussions in those areas, as I said, energy security, cyber security, areas of responding to China where we could actually come to great agreement that would be in both of our interests.
Michael Koplovsky, let me remind our listeners that you are visiting professor at College of Europe and the masters of transatlantic affairs. You're also a former US diplomat and trade negotiator. Thank you so much for your time and for answering my questions.
This episode was prepared with the support of MATA Assistants Coralie Axelle Ballieu and Marie Ketterlin.
