EU struggles with US tariffs: Is decoupling the only option left?

In the face of escalating tariffs imposed by the Trump administration, the European Union is finding itself at a crossroads, caught between the need to appease U.S. demands and its growing desire to reduce dependence on American trade and defense. Foreign Policy explores the delicate balance Europe must strike in the face of rising tensions with the U.S. and shifting global dynamics.

The latest round of tariffs, including a 25% levy on steel and aluminum imports, has prompted the EU to consider alternatives, even as it faces the challenge of retaliating without further alienating the U.S. or harming its own economy, 

While the EU initially responded to Trump’s tariffs with retaliatory measures targeting American goods like Harley-Davidson motorcycles and Kentucky bourbon, its leaders are now exploring less confrontational strategies. One key approach is reviving dormant trade agreements, such as the 2024 deal with Mercosur nations (Argentina, Brazil, Paraguay, and Uruguay), which aims to open up vast new markets across Latin America. However, this comes with its own set of challenges, particularly regarding the EU’s environmental standards and agricultural concerns.

European Commission President Ursula von der Leyen has also focused on strengthening relations with other countries, including India and Malaysia. In January 2025, she highlighted the EU’s growing influence, particularly in Latin America, where it has secured trade deals that could soon engage 400 million consumers. The EU is actively pursuing an EU-India free trade agreement, with both parties willing to make significant concessions to foster stronger ties. However, India’s reluctance to open up its agricultural markets presents a complex hurdle, especially given the country’s reliance on the sector for employment.

Despite the optimism surrounding these new agreements, there is growing concern that they may not be enough to offset the losses from U.S. tariffs. Economic experts, like Jacob Kirkegaard from Bruegel, suggest that while the EU’s shift toward less stringent regulations may facilitate trade, it remains unclear whether these partnerships can fully compensate for the loss of American trade.

As European leaders grapple with these shifting dynamics, some scholars propose taking a stronger stance by pursuing action at the World Trade Organization (WTO) against the U.S. However, others believe that an outright decoupling from the U.S. is premature, with the potential for targeted tariffs on individual EU member states rather than the bloc as a whole.

Ultimately, the EU faces a delicate balancing act: striving to safeguard its economic interests while avoiding a complete rupture with the U.S., whose trade policies remain unpredictable under President Trump. The hope in Brussels is that diplomatic negotiations can secure a mutually beneficial deal before a full decoupling becomes inevitable.

By Vugar Khalilov