Trade and Digital Agreements: EU Levers to Deal with the United States

Transatlantic trade negotiations continue to unfold. They are shaken by new U.S. demands and include both highly publicized components—such as digital regulation—and more confidential ones, like cybersecurity or customs procedures. The Commission, aiming for at least a rudimentary agreement, accepted the key parameters of a compromise in two versions—one European, one American—on 27 July. A shared text only clarified part of it on 21 August. Many points remain unclear. Above all, Donald Trump has repeatedly kicked over the negotiation table with new demands, also voiced by his lieutenants. This is exemplified by the massive, swift extension of U.S. duties on steel and aluminum to hundreds of products containing the targeted metals—even if assembled elsewhere, including in the U.S.: rather than abating, the dispute is expanding.

Meanwhile, Europeans—whether through lobbying by major firms (in automotive, luxury goods, and spirits, among other sectors), or via governments and the Commission—have constantly sought relief, while conceding on deliverables demanded first by the U.S. and they have temporarily shelved a prepared retaliation plan. Relying on broad brush European assurances (energy or arms purchases, investments) is risky, as the U.S. could at any time invoke these as unmet commitments to launch new attacks.

"Submission"?

The optics do work against the EU, seen as aligned before "Daddy" Trump in the Oval Office—a phrase from Mark Rutte, perhaps misunderstood. Like China with its visitors, the White House protocol knows how to showcase the new emperor. In terms of visual protocol and negotiation psychology with a leader full of himself, is there an ideal strategy? Whether flexibility or resolution, the approach must rest on the perceived balance of powers, as judged by the occupant of the White House. Others—from Zelensky to Modi—have painfully learned this. Conversely, conceding to this administration—as with authoritarian regimes—signals weakness, inviting further demands.

Perhaps by default, the EU chose to avoid confrontation as much as possible. How can one speak of reciprocal tariffs when a 15% U.S. minimum matches a zero‑rate for industrial exports in Europe? How can one talk of European legal sovereignty when Trump threatens dire consequences should the EU enforce its digital regulation on Very Large Online Platforms (VLOPs) and Very Large Online Search Engines (VLOSEs)? Consider this symbolic, minor example: a Republican report in Congress denounces the French association e‑Enfance as state censorship—yet the group combats school bullying and child access to pornography.

The Balance of Power

Our indignation and posturing risk staying moot. It is dangerous to place excessive hope in the U.S. judicial system: a reversal in a Court of Appeals (as occurred on 29 August) regarding the International Emergency Economic Powers Act (IEEPA) says nothing about the Supreme Court, increasingly sympathetic to Trump. Moreover, the administration is preparing, under Section 232 of U.S. trade law—allowing the President to apply tariffs and quotas for national security reasons,—numerous sectoral measures that are effective and hard to challenge domestically, even if they contravene WTO spirit. Objectively, the EU has done less well than Canada and Mexico—whose production chains are deeply intertwined with the U.S.—or the UK, possibly benefiting from Nigel Farage’s influence on Trump. However, the EU performed as well as Japan, which agreed to higher  investment commitments in the U.S., and South Korea. Not to mention more isolated emerging powers like India or Brazil, subject to various Presidential whims.

The Trump gamble has indeed succeeded in several respects. First and fundamentally: it has divided partners. The UK went its own way (although helped by some provisions of the Brexit withdrawal agreement with the EU), there was no effective coordination among the EU, Japan, and Korea despite converging views, and the U.S. leveraged some governments within the EU. France, whose trade surplus in manufactured goods with the U.S., is at best negligible, couldn’t counterbalance the weight of Germany’s strong surplus. France is also a major importer of American oil and gas: that should temper criticism about EU energy purchase commitments. And Europe already sources its arms largely from the U.S. The strategic imperative to keep the U.S. engaged on Ukraine weighs heavily. Whether this tactic will work with Trump and J.D. Vance remains to be seen-but it is unavoidable at this point, as the Russian threat is not a decade away, but today.

The other U.S. success is the normalization of a historically high average tariff-15%-that is crucial for Donald Trump’s expansion budget policies: it could amount to about a quarter of the 2024 U.S. budget deficit. The "optimists" in Europe hope that the tariffs’ inflationary impact will strangle Trump’s pro-growth policy. Yet lower energy costs and margin erosion for foreign exporters blur this effect; only a renewed dollar devaluation would truly fuel inflation - and favor at the same time international investment in the U.S...

Digital as an American Interest

The U.S. logic is clear: penalize foreign goods that are the bulk of the trade deficit, but resist foreign regulation or taxation of services-especially digital. The U.S. runs a massive surplus in services and, due to the scale economies of platforms and search engines, expansion requires minimal cost apart from data storage. The U.S. dominates this domain with China as a distant competitor. The. U.S. discourse always includes TikTok (ostensibly "American") among GAFA, and never accepts the European neutrality argument. Yet, Apple (and Meta in its advertiser-sourcing, profitable operations) comply with Chinese censorship rules-Google and others are banned.

Europe has no short- or mid-term alternative to these digital giants, despite support for European startups. But it is also unlikely that platforms would abandon the European market altogether.

But do ideological interests-defending almost total free expression online, without independent fact‑checking or transparency over algorithms-carry as much weight in the U.S. as commercial interests (avoiding penalties for algorithmic bias and retaining ad revenue)? In spite of MAGA’s anti‑woke agenda, that is doubtful.

Europe’s Digital Levers-and Limits

European regulation imposes potential penalties of 6% (DSA) to 10% (DMA) of global turnover-large amounts that are in fact patterned on America’s own extraterritorial penalties. Ongoing cases include Meta and TikTok (as gatekeepers resisting their fees for EU oversight, which could reach 0.05% of global revenue).

Europe may thus push for negotiation on these penalties themselves. While these leverage points may seem unfair—just as U.S. tariffs do—they could be bargaining chips.

Sylviane Agacinski aptly contrasts two cancel cultures—woke and conservative reactionary. These divides also exist within Europe. The freedom-of-speech dilemma is acute regarding “dog-whistling” (alluding rather than stating discriminatory or defamatory content). The U.S. takes a literal stance, resisting control; Europe’s public action is increasingly expansive. A prudent advice: avoid endless expansion to new oversight fields, lest electoral backlash reverse the political trend, as seen in the U.S.

The idea that there is no other choice than an alignment—not on U.S. norms, but on the absence of norms, in spite of the Biden administration’s fragmentary efforts, must be challenged. On platforms like X or Facebook this battle is currently lost; the debate revives with AI, including among Silicon Valley proponents themselves —not to mention China’s Deepseek, where ideological conformity is a prerequisite. Should regulation be ex ante—as EU law now proposes—or ex post, easier for regulators but less effective? The early legal challenges to recent sanctions may provide a clue.

Ultimately, this should be secondary to the strategic goal of establishing a common digital space—just as in maritime or space law, state fiat alone cannot dictate. The present U.S. digital dominance should not overlook this reality. Otherwise, there is a risk of creating closed national digital spheres - the ideal haven for authoritarian regimes..

Remaining Areas of Convergence

Beyond the above, that seems to be an utopia under today’s U.S. administration, some convergence exists in areas of mutual interest. Current or emerging 2025 initiatives include critical materials, broader cybersecurity, and customs procedures. In raw materials, a common reaction framework against third-party denials is agreed. In cybersecurity, mutual recognition of standards is underway. The 21 August communiqué indicates the EU "plans" to collaborate with the U.S. on technology security requirements, aligned with U.S. standards. Since 1 August, Europe applies U.S.-origin RED rules on radio communication devices. Both parties strengthen undersea cable security; NATO’s "Baltic Sentinel" can also be cited (Who leads there remains open to interpretation). On customs, the agreement mandates private-sector consultation on digitizing processes, calling for EU-level data unification. The roll-out will extend to 2038 for mandatory e‑commerce integration -  a late date, of course.. French customs estimate 200 million customs declarations in 2024; removing the exemption for parcels under €150 already exploded that number. Modernization and tech cooperation on standards and procedures are vital.

Conclusion

Though a European digital maximalism may seem infeasible, we hope Europe can wielddigital policy—where the U.S. holds much capacity but also has deep  stakes—as a negotiating lever. Trump may have started this dance—but the client also has a say. The EU is not China—where Xi Jinping contemptuously rejected Nvidia H20 chip sales to develop domestic capacity. Nor can it envision becoming the global digital market of the future—emerging powers like India may aspire to that rank. Yet a scope  with the U.S. remains. May European officials on the frontline  use it wisely.

Copyright Brendan SMIALOWSKI / AFP