When US President Donald Trump first threatened in 2018 to raise tariffs on European iron and steel, then-European Commission President Jean-Claude Juncker warned that Europe could “also do stupid” — a vivid signal that retaliatory tariffs would hurt the US economy just as much as its trading partners.
Less than a decade later, as the bloc confronts unprecedented US tariffs and a surge of cheap Chinese imports, the EU’s own trade pendulum is swinging back towards protectionism.
Over the past year, the bloc — long a staunch defender of free trade — has tightened steel safeguards, floated tougher made-in-Europe rules for defence procurement, imposed stringent import quotas on ferro-alloys and weighed using revenues from an upcoming carbon levy to favour exports.
This shift reflects a growing sense in Brussels that business as usual is no longer viable. Last summer, the US imposed steep tariffs on most EU. Meanwhile, as the US market closed, Europe became an even larger destination for cheap Chinese goods.
Yet the EU’s push to shield its industry has hit resistance. A group of countries, led by Czechia and backed by the Nordic and Baltic states, blocked plans that would have made it harder for companies to use cheaper non-EU components. As a result, a strategy expected to be unveiled last week, known as the Industry Accelerator Act, was postponed until next month. The proposal aims to introduce local-content criteria to boost demand for EU-made strategic technologies like electric vehicles and batteries.
The revolt underscores a widening rift between those willing to bend trade rules to shield domestic industry and those determined to uphold the EU’s international commitments.
“We are really going to see where the Commission comes out on this — between those who want to go in this direction and those who want to be more careful because they respect the international commitments of the EU, including those which are reflected in the trade agreements,” said Ignacio Garcia Bercero, a non-resident fellow at the Bruegel think tank and a former director at the Commission’s trade department.
Fears of backlash inside the single market
At the heart of countries’ cautiousness is concern that “made in Europe” preferences would have “unintended consequences for the openness or integrity of the single market,” according to a Czech position paper signed by Estonia, Finland, Ireland, Latvia, Malta, Portugal, Sweden and Slovakia in early December.
“There are more countries that do not buy French protectionism,” said one EU diplomat from the coalition, speaking on condition of anonymity.
The paper warns that an aggressive turn towards protectionist would “obstruct international R&I [research and innovation] collaboration, disrupt complex supply and value chains, distort competition, or have other negative implications for companies established in the EU that are already deeply integrated into the EU economy.”
Protectionist advocates often dismiss these concerns as outdated. Europe, they argue, has been naïve too long in a radically altered global economy.
“The Europeans are looking at a different world where they need to respond not just to the United States, but to diversions of trade flows from other countries,” Peter Chase, a visiting senior fellow at the German Marshall Fund (GMF), told The Parliament. Under these new circumstances, Chase admitted, “you’ve got to be a bit more aggressive in using the trade defence instruments you have.”
The numbers bolster that case. In November, China’s global goods surplus exceeded $1.08 trillion. Of that total, Europe accounted for €304.5 billion in 2024, surpassing for the first time China’s imbalance with the US at $295.5 billion.
Meanwhile, the US economy has shown little visible damage from its tariff blitz announced on “Liberation Day” and partially achieved one of its stated aims of reducing its trade deficit, though it remains unclear whether the deficit with the EU has narrowed sustainably.
“We have to quickly realise that we are alone,” said a diplomat from the protectionism camp, speaking on the day Washington released its scathing US National Security Strategy that described Europe as facing “civilizational erasure.” The document sent shockwaves through European capitals and left little room for those still viewing the US as an ally.
Trade defence versus global partnerships
European trade experts warn that penalising imports — even cheaper or more advanced ones — could jeopardise the EU’s ability to strike new trade deals just as transatlantic commerce slows.
García Bercero called the outcome of the debate “critical,” cautioning that strict made-in-EU rules would contradict international commitments and weaken Europe’s capacity to forge partnerships with like-minded economies like Japan and South Korea.
In her annual state of the union address, Commission chief Ursula von der Leyen pitched joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a vast trade pact featuring countries such as Australia and Malaysia, as a hedge against losing access to the American market. Last week, Brussels scrambled to finalise a controversial deal with Mercosur countries, after a last-minute spat delayed signing until mid-January. France, and now Italy — two agricultural heavyweights — are demanding extra safeguards before signing an agreement that risks harming farmers and inflame a politically sensitive constituency.
Negotiations with India are also underway, with a deal targeted for early next year. But analysts say those same agreements are jeopardised if Brussels breach trade law and existing deals to prop up EU industry.
“I don’t think the solution [to Chinese overcapacity and US tariffs] would be taking measures that would hurt those countries that are the natural allies of the European Union,” insisted García Bercero, noting that embarking on a “buy Europe” route would ultimately harm far more countries than China.
David Kleimann, a senior research associate at the ODI think tank, argues the EU has more legal alternatives. One option would be excluding from public tenders WTO members that have not signed the government procurement agreement — which guarantees reciprocal access. China has yet to ratify it.
“While local content requirements are illegal, the EU has some lawful means to foreclose market access against some of the fiercest foreign competitors,” he said.
For its part, Brussels has maintained its protective measures remain in line with free-trade principles and are subject to scrutiny. To that end, the EU’s executive arm this summer launched a trade surveillance tool to prevent the EU from becoming a dumping ground for goods diverted from other markets.
The fault lines running through EU trade policy
The tension between protectionism and liberalism is hardly new.
For small, export-dependent countries like Sweden and Finland, free trade is both a doctrine and a necessity. Their prosperity hinges on access to global markets.
“We see from Sweden that international trade can benefit not only economic prosperity but also social progress,” said Ellen Nygren, an official at the Swedish Trade Union Confederation.
France sits on the opposite side of the spectrum, with a longstanding belief in protecting national champions — a view often shared by Southern European countries such as Italy.
But the pivotal question is Germany. Historically liberal on trade, Germany exported more than 40% of its GDP in 2024. But the country now faces industrial decline, job losses, and political fragmentation.
As Kleimann put it, “the EU’s liberal trade doctrine stands and falls with Germany.”
"If protectionist sentiments take over in Germany in context of Germany’s industrial malaise,” he said, “we can safely start writing the obituaries for the EU’s open trade sentiment.”
Sign up to The Parliament's weekly newsletter
Every Friday our editorial team goes behind the headlines to offer insight and analysis on the key stories driving the EU agenda. Subscribe for free here.