This is a make-or-break moment for the EU

It may be tempting to think appeasement is worth it to avoid the damage of a full-blown trade war. But if the EU surrenders now, it will cement its vassalage to Donald Trump just as the UK has.

Over the past weeks, President von der Leyen has been preparing an EU surrender to Donald Trump - at the urging of Germany, Italy and others. At the European Council summit last month, EU national leaders seemed to converge around German Chancellor Friedrich Merz’s suggestion that the EU should accept a ‘quick and dirty’ trade deal with the US as the UK did in May. But yesterday’s US escalation, with Trump sending an intimidating letter to President von der Leyen threatening 30% tariffs unless the EU surrenders, has possibly stiffened spines.

Even the German centre-right CDU party of von der Leyen and Merz seems to be suddenly changing its tune. “At some point, enough is enough - the Commission must start responding,” influential CDU MEP Daniel Caspary told Handelsblatt yesterday. Centre-left German MEP Bernd Lange, who chairs the EU Parliament’s trade committee, called Trump’s letter "impertinent” and urged, “the first list of countermeasures must be activated on Monday.”

Germany is the one to watch here. While among the big countries the calls for surrender have been coming from many capitals including Rome and Berlin (and to a lesser extent Warsaw), as the bedrock of the EU’s economy (and the home country of the EU’s president) it will be Berlin who will be the deciding factor at this critical moment. All eyes are on the new German Chancellor Friedrick Merz, who immediately after winning the election in February seemed to be setting a hawkish tone for defending Europe from America but since then has started to cower. Over the next two weeks, will we get the bold February Merz or the intimidated June Merz?

National EU permanent representatives are meeting today to try to formulate a united response. The first thing they must decide is what to do about the planned imposition of the EU’s retaliatory tariffs against the US which are due to take effect on Tuesday. That had been timed for Trump’s original tariff deadline of last Wednesday 9 July for the end of negotiations to avoid a 50% tariffs against the EU. But this planned retaliation isn’t against the blanket tariffs, it’s actually a delayed response to the original steel and aluminium tariffs that took effect months ago - not to the 20% Liberation Day tariffs or the increased 50% and 30% threats. The steel and aluminium tariffs are fully in effect and there is no reason to delay them. But last week President von der Leyen was reportedly preparing to delay them in order not to antagonise the Americans during the sensitive negotiations leading up to the new deadline of 1 August. Following Trump’s letter yesterday, a number of EU politicians have called on the Commission not to delay this initial retaliation any further and to quickly craft a new salvo of retaliation for if the 30% tariff takes effect on 1 August.

Most significantly, that includes French President Emmanuel Macron. Late yesterday he called on President von der Leyen to “resolutely defend European interests” in response to the American threats. Macron called for the EU to "step up the preparation of credible countermeasures by mobilising all instruments at its disposal" if the two sides fail to reach an agreement by August 1. The EU should not accept a deal at any cost, he said, and any deal should “reflect the respect that trade partners such as the European Union and the United States owe each other.”

But Macron’s approach also comes with major risks. In his letter, Trump threatened: “If for any reason you decide to raise your Tariffs and retaliate, then, whatever the number you choose to raise them by, will be added onto the 30 percent that we charge." This is exactly what he did when Canada retaliated. There is no good option here, there is only the least worst option. If the EU retaliates it risks a major escalation that could result in a disaster for the EU and US economies. If the EU surrenders, they still accept an arbitrary and illegal 10% tariff that not only causes economic damage (though not as much as a 30% or 50% tariffs) but also locks the EU into a weak and subservient position where it must continue to obey diktats from the Trump regime. If the EU accepts the illegal 10% tariff as the UK did it would also effectively destroy the WTO. The EU would also be accepting the principle that Washington dictates EU legislation, because part of the deal will be that the EU will water down its digital legislation and scrap its planned digital tax.

But think of it this way - by surrendering we know what the EU gets: a collapsed WTO, 10% tariffs and acceptance of Washington veto power over EU legislation. By retaliating we don’t know what we get. Given TACO precedent, it is very likely Trump yields to bond market pressure and never goes through with the tariff at any level (even 10%). The choice is between accepting an outcome with guaranteed marginal short-term pain and major long-term pain, or gambling on an outcome with potential major short-term pain but possibly no pain at all.

President von der Leyen already signalled last week, before receiving the letter, that she intends to offer Washington veto power on EU legislation. In the latest draft of the EU’s long-term budget, set to be proposed shortly, she has scrapped the planned digital tax that would majorly impact American tech giants - a key surrender demanded by Washington. But that’s still just a draft. Will this threatening letter stiffen spines and see the tax reintroduced in the final proposal next week?

Over the next days, the EU faces a critical choice that will determine the future of this continent. Until yesterday, it was clear that President von der Leyen was preparing to raise the white flag - as she was asked to do by Berlin and Rome. But will Trump’s “impertinent letter” stiffen spines? It would be quite interesting if Trump has actually snatched defeat from the jaws of victory by interrupting the EU’s path toward surrender.

Both options are bad, and Europeans may be tempted to accept the option that comes with less short-term pain. But in accepting smaller tariffs now, they set themselves up for much worse long-term pain. History has shown that appeasement doesn’t work. The message of surrender will be clear, and Trump will be emboldened to move further and more aggressively against the EU - perhaps with a military invasion of Greenland as he has suggested.

Last week, as Brussels and Washington were reportedly closing in on a trade deal in which the EU would accept the illegal 10% tariffs and change its legislation at Washington’s command, Tobias Gehrke from the European Council on Foreign Relations noted:

This deal may spare Europe the worst of Trump’s tariffs. But it comes at the cost of sacrificing its interests and international credibility. Only few in Brussels will pop champagne. The EU fumbled its hand, despite holding decent cards. It talked about ‘negotiating from a position of strength’ while refusing to flex any muscle. Deterrence only works if the other side believes you’ll use it. While Washington and Beijing take economic hostages and barter them for power, Europe still recites the rulebook. The strategic mindset gap has rarely been so stark. Europe needs to rethink what economic security actually means. De-risking is only part of the answer. The next task is to map Europe’s leverage and be ready to use it, offensively and transactionally, if needed.

European leaders have so far been failing their citizens. Instead of defending them from the American threats, they have been acquiescing to Trump’s demands as they cower in fear. NATO Secretary General Mark Rutte was speaking for an entire continent last month when he grovelled to Trump and called him “daddy”. He was only doing very visibly what his fellow European leaders have been doing in a less cringe-inducing way.

“Enough is enough”, to quote MEP Caspary. European leaders must make a choice. Either they accept that they are ruled by Washington, or they declare their independence. The UK has made its choice. But for the EU, there is still time to stand up to the American bully. Let’s hope that our European leaders reverse course and realise that they were elected to serve the interests of their citizens and not the interests of Washington.