US Trade Threats Now Target EU: Is America’s Economic Pressure Campaign Going Global?

Not just India & China, EU too faces US threat

Introduction

For years, headlines have focused on U.S. trade wars with China and tariff spats with India. But a seismic shift is underway. The United States is now openly threatening the European Union—the very heart of its traditional Western alliance—with sweeping economic measures that could redefine global commerce . This isn’t just about steel or semiconductors anymore; it’s about America’s evolving vision of economic sovereignty in an increasingly fragmented world.

What’s driving this bold pivot? And why is Washington willing to risk alienating Brussels—a partner on everything from Ukraine to climate change—just as geopolitical tensions peak? The answer lies in a potent mix of domestic politics, industrial policy, and a growing belief in Washington that “friend-shoring” must come with strings attached. In this deep dive, we unpack the scope of the US trade threat, its implications for Europe, and what it means for the future of globalization itself.

Table of Contents

The New Front in US Trade Policy

Gone are the days when U.S. trade policy was guided primarily by free-market ideals. Under both Trump and Biden, America has embraced a form of “strategic protectionism”—using subsidies, export controls, and tariffs to rebuild domestic manufacturing and counter perceived foreign dependencies .

The Inflation Reduction Act (IRA) and CHIPS and Science Act were early signals. But recent statements from U.S. officials—including warnings of potential tariffs on European green tech and digital services—confirm that the US trade threat is no longer confined to strategic rivals like China. Allies are now fair game if they’re seen as undermining American jobs or industrial goals.

Why the EU Is Now in the Crosshairs

Several factors explain this escalation:

  • Green Subsidy Rivalry: The EU’s Green Deal Industrial Plan offers massive state aid to clean tech firms—mirroring U.S. IRA incentives. Washington fears a “subsidy race” that disadvantages American companies.
  • Digital Services Tax (DST): Although paused, the EU’s push to tax U.S. tech giants like Google and Meta remains a sore point.
  • Trade Imbalances: The U.S. runs a persistent trade deficit with the EU, particularly in automobiles and pharmaceuticals.
  • Geopolitical Leverage: Some in Washington believe economic pressure can ensure EU alignment on issues like China policy and defense spending.

Key Sectors at Risk

If the U.S. follows through on its threats, these industries could face immediate disruption:

  1. Electric Vehicles (EVs): EU-made EVs may face steep tariffs under Section 232 or anti-subsidy probes, mirroring actions against Chinese EVs.
  2. Renewable Energy: Wind turbine and solar panel imports from Europe could be targeted over alleged state support.
  3. Pharmaceuticals & Luxury Goods: High-value EU exports like German drugs or French fashion may become bargaining chips.
  4. Financial Services: Regulatory friction could increase for EU banks operating in the U.S.

Beyond Tariffs: The Broader Economic Agenda

The real danger isn’t just tariffs—it’s the erosion of trust in the transatlantic economic partnership. The U.S. is increasingly treating trade through a national security lens. For example:

  • The Treasury Department’s scrutiny of outbound investment could restrict U.S. funding for EU tech startups.
  • Data privacy rules (like GDPR) may be labeled “digital protectionism,” triggering WTO disputes.
  • Joint efforts on AI governance or critical minerals could stall amid mutual suspicion.

This represents a fundamental shift from cooperation to competition—even among allies.

EU Response: Diplomacy or Retaliation?

Brussels is walking a tightrope. On one hand, EU Trade Commissioner Valdis Dombrovskis has called for “de-escalation” and renewed dialogue . On the other, the EU has activated its own anti-coercion instrument—a legal tool allowing retaliatory measures against economic blackmail.

Behind closed doors, EU leaders are also accelerating plans for “strategic autonomy,” including:

  • Boosting domestic semiconductor production
  • Creating a European Sovereign Wealth Fund
  • Reducing reliance on U.S. cloud infrastructure

Yet full decoupling remains unlikely—the two economies are too intertwined.

Global Ripple Effects

A transatlantic trade rift would send shockwaves worldwide:

  • Supply Chains: Companies relying on EU-U.S. integrated manufacturing (e.g., aerospace, autos) face chaos.
  • Developing Nations: Countries like India and Brazil may be forced to choose sides, fragmenting global trade rules.
  • WTO Relevance: Further erosion of the multilateral trading system as blocs form around U.S. and EU standards.

Conclusion: A World Divided by Economic Blocs?

The US trade threat against the EU marks a turning point. No longer is economic coercion reserved for adversaries—it’s becoming a standard tool even within alliances. While outright trade war may be avoided through last-minute diplomacy, the underlying trend is clear: the era of seamless globalization is over. In its place emerges a world of competing economic spheres, where loyalty is measured not by shared values, but by supply chain alignment. For businesses and policymakers alike, adaptability—not ideology—will determine survival. To understand how nations are reconfiguring trade, see our analysis on [INTERNAL_LINK:global-supply-chain-restructuring-post-2025].

Sources

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