The EU Doesn’t Need Trump for a Trade War

The slow pace frustrating the U.S. president comes from a larger, structural problem plaguing the bloc.

WSJ, Joseph C. Sternberg, May 29, 2025

President Trump appears to be annoyed that trade negotiations with the European Union are dragging along too slowly. Join the club, pal. The biggest victims of Brussels’ indecision and sloth on trade are the Europeans themselves. Even if Mr. Trump’s tariffs fall to U.S. courts, it won’t liberate the Continent from trade war. The bloc is too good at doing damage to itself.

The EU finds itself under an uncomfortable Klieg light after Mr. Trump’s weekend fulminations about the bloc. The 27 countries that make up the EU have been grappling with uncertainty since April 2—Liberation Day—when Mr. Trump threatened 20% “reciprocal” tariffs, only to suspend them for 90 days pending further negotiation.

Then, late last week, the president railed that he’d amp tariffs up to 50% as of June 1—likely in a fit of pique that talks on a permanent trade deal are dragging out. After markets reacted badly to the news, Mr. Trump delayed this to July 9. European Commission President Ursula von der Leyen, who runs the EU’s bureaucracy, provided an off-ramp for Mr. Trump when she promised to herd the European cats a bit more aggressively—good luck to her on that.

America has ample cause to be irritated with Europe on economic matters, ranging from neurotic food and other product safety rules to resentment-fueled tech regulations and sanctimonious climate policies. It’s nonetheless hard to know to what ends, precisely, Mr. Trump is trying to negotiate. One wonders if he knows himself.

Much of the president’s ire at the EU appears to be directed at not Germany but West Germany. Mr. Trump’s old-fashioned notions of trade and America’s global competitors seem to date mostly from the 1970s and ’80s, when goods from fully reindustrialized West Germany and Japan started appearing on American store shelves and car lots.

To the extent there’s any serious theoretical basis for Mr. Trump’s tariff war, economists influential in the Trump orbit complain that Germany chronically underconsumes and oversaves, recycling excess cash into capital outflows that land in the U.S. and cause our trade deficit. That’s a debatable proposition, and it isn’t obvious how concessions Mr. Trump might demand from Brussels would adjust Germany’s trade and capital balances. We won’t shrink Germany’s trade surplus by forcing Europe to import American-made cars Europeans don’t want to drive or American-reared beef Europeans don’t want to eat.

Undeterred by these considerations, Mr. Trump is baffled and annoyed by the EU. If only he could recognize that the things he finds so off-putting about the bloc aren’t tricksy negotiating tactics by which they injure the U.S. but structural weaknesses by which they hamstring themselves.

Trade talks with Brussels proceed at a dilatory pace because the EU has never fully lived up to its promise as a continental free-trade bloc. It’s a zone governed (if that’s the word) by consensus. Any member can throttle relations with the rest of the world for domestic political concerns. Meanwhile, Brussels has limited scope to enforce rules that are supposed to create free internal trade within the bloc, and national governments can and do freestyle at will.

A consequence is that although Brussels publicly frets about potential trade barriers with the U.S., Europe’s internal trade barriers are far costlier. Behold “the myth of the single market,” as Spanish politician and professor Luis Garicano described it this month. The International Monetary Fund calculates that Europe’s complex economic regulations impose the same costs as would a 44% tariff on goods traded between EU countries. For services, the costs of complying with different national rules are equivalent to a 110% tariff. By comparison, the regulatory costs associated with trading manufactured goods across state lines within the U.S. amount to a 15% tariff.

Mr. Garicano cites numerous examples, and he still barely scratches the surface. Construction materials require national regulatory checks as they cross from one EU country to another. Professional licenses for nursing-home workers aren’t easily transferable if individuals move within the bloc. Denmark imposes idiosyncratic regulations on breakfast cereals that can be freely sold in most of the rest of the EU. France requires a unique recycling logo on packaging.

This helps to answer the big unasked question surrounding negotiations between Washington and Brussels, which is why the Europeans care so much. With a population of nearly 450 million people, the EU ought to be a sufficiently vast market to sustain its own economic growth even if a major trading partner becomes intent on economic self-destruction.

Alas, chronic mismanagement at the national level—exacerbated rather than contained by Brussels—depresses Europe’s economic growth to the point that per capita incomes are now roughly one-third smaller than in America. This in turn forces the continent into uncomfortable reliance on the U.S. (and, one must add, China).

It’s yet another irony of the Trump era. Mr. Trump thinks Europe’s economic regulations and trade barriers exist to take advantage of America. But the EU’s biggest victims are Europeans. Mr. Trump could just sit this one out.