Tariffs are bad for business. They harm the international division of labor and drive up consumer prices. Their comeback shows that we are living in an era dominated by politics. A new age of power politics has begun.
Donald Trump communicates loudly, sometimes shrilly. That he declared April 2 — the day an aggressive U.S. tariff program is introduced — as “Liberation Day” should come as no surprise; it’s part of the White House’s harsh communication strategy since he took office.
Trading partners like the European Union are reacting with shock, threatening countermeasures to the announced 20 percent tariff hike. Others, like Argentina’s President Javier Milei or Mexico, emphasize their willingness to make concessions and bow to the threatening posture. (RELATED: Europe Is No Longer Worth Defending)
But behind the U.S. president’s harsh rhetoric lies more than mere provocation. The U.S. is firmly in the grip of a double deficit. Both trade and fiscal balances are sliding deeper into the red, causing disruptions in the American economy, including the loss of its industrial base. This is where the new U.S. administration steps in, aiming to eliminate the so-called “Triffin Dilemma.”
This dilemma states that the issuer of the world’s reserve currency must supply global liquidity through a corresponding trade deficit. Tariff policies and tax cuts are intended to free the world’s largest economy from this stranglehold. That’s the core of the issue.
Outcry of the Perpetually Outraged
History teaches us that this can lead to problems. Active tariff policies often escalate into trade wars and can inflict severe damage on the economies involved. Only free trade enables economic actors to develop specialization patterns that ensure optimal market supply.
However, we’re not in a utopian textbook economy but at a geopolitical threshold that brings back cold power politics and national preferences. The EU’s reaction to the U.S. trade policy U-turn is predictably fierce. Following the busy travel schedules of top European politicians like President Emmanuel Macron and Prime Minister Keir Starmer, the EU Commission has now announced plans to counter the U.S. tariffs with retaliatory measures. Welcome to the trade war!
Yet, following the Europeans’ waves of indignation, one can’t help but rub their eyes in disbelief. After all, it’s the EU that built its foundation on coal and agricultural subsidies and has operated an oversized subsidy machine to pursue its industrial policy ambitions since its founding days.
They never breathed the free trade principles that the United States was founded on. For U.S. companies stepping into the European single market today, they face a plethora of regulatory trade barriers masquerading under the euphemism of “harmonization.” Subtly, and instead of high import tariffs, the EU fends off external competition through product and production standards (e.g., supply chain laws), bureaucratic hurdles, and protective tariffs for its core sectors at the borders. Consumers foot the bill through higher prices as competition is weakened.
Common Agricultural Policy as a Pseudo-Argument
Products like meat or dairy from third-party countries face not only tariffs but also hygiene and quality standards that are often nothing more than pure harassment designed to eliminate potential competitors. The media frequently highlights consumer protection, but in reality, the Common Agricultural Policy (CAP), to name just one example, serves solely to shield domestic producers. According to the OECD, such non-tariff barriers account for up to 60 percent of EU protectionism — far more than visible tariffs and clearly a justification for the U.S. administration to step in.
The industrial sector paints a similar picture. The automotive industry, for instance, is protected by a 10 percent tariff on imported vehicles, supplemented by technical regulations and emissions standards tailored to European manufacturers and their production structures. U.S. or Asian firms are forced to bear high adaptation costs and enter the market at a noticeable disadvantage. The result: de facto market protection for companies like Volkswagen or Stellantis, without the EU appearing overtly protectionist.
The U.S. Lays Its Cards on the Table
While the U.S. now seeks to reduce its trade deficit and rebuild its industry, the EU operates in the shadows. The Carbon Border Adjustment Mechanism (CBAM), set to take effect in 2026, will tax imports from countries with lower climate standards like the U.S.
Officially, it’s about climate protection. In reality, it’s a sharp tool of protectionism, as Europeans wield the CO2 stick as a business-killing argument, knowing that outside Brussels’ climate-moralizing bureaucracy, economic pragmatism trumps ideological fantasies.
In the digital economy, too, the EU imposes strict regulations on U.S. tech giants like Google or X while actively promoting domestic competitors. The General Data Protection Regulation (GDPR) complicates market access for non-European firms, while domestic companies benefit. This isn’t free trade — it’s targeted isolation.
Outcome Uncertain, but Advantage U.S.
It remains to be seen how this conflict unfolds in the coming weeks. The U.S. is banking on its broad technological base, energy autonomy, and ability to attract mobile capital to invest in the States through more open markets.
It accepts that its tariff policy will initially weaken U.S. consumers. Europe should see the Trump administration’s gauntlet as a call to action and critically examine its own concepts and missteps.
A return to market-based principles and open markets is a logical conclusion to draw from the Americans’ political pivot under the new administration. However, this is unthinkable without a radical rethink in Brussels and European capitals.
The attempt to build a green, largely deindustrialized economy has failed in the face of economic reality. This reality manifests as a deep growth crisis and stagnating productivity growth. And now, Brussels’s central planning apparatus is exposed to the glaring light of that reality.
Thomas Kolbe, born in Neuss, Germany, has a degree in economics. He is a freelance author and media producer for clients from various industries and business associations, with over 25 years experience.
READ MORE:
Confusion About Tariffs in the Trump Administration
The Tariff Reckoning: America’s Economic Resolve in Trump’s Second Act
