The best response to Donald Trump’s tariffs would be strategic restraint, argues Joshua Fenton. By refusing to be drawn into a trade war, Europe can protect itself from further damage and demonstrate the futility of unilateral tariffs.
In the eyes of Donald Trump, tariffs are tools of strength, part of a zero-sum game designed to reduce trade imbalances and reclaim America’s industrial dominance. However, the instinct for Europe to retaliate to Trump’s tariffs may be misguided.
During Trump’s first term, the US and China were involved in a trade war in which both countries imposed tariffs on hundreds of billions of dollars’ worth of goods. This raised consumer prices and disrupted supply chains, but without achieving any meaningful trade reform.
Rather than escalate, European politicians should therefore consider restraint. This strategy would protect European consumers and leave the United States and the Trump administration to absorb the backlash.
Why retaliation is costly
When a country implements tariffs on US goods, it is taxing its own importers and consumers. Analyses of the last trade war showed that import tariffs were “borne almost entirely” by US importers as foreign exporters didn’t significantly cut prices to offset the tariffs.
In other words, American consumers paid more for targeted products, not China. The same logic applies in reverse. If Europe or Canada answer Trump’s tariffs with their own, it would be their shoppers facing higher costs, and their manufacturers paying more for crucial imports. Tariffs feed domestic inflation and often invite political blowback, a reality economists consistently warn about.
Recent modelling of escalatory tariffs suggests that if Canada and Mexico answer US tariffs in kind, it would worsen economic pain for all sides. The US economy would take a hit, but Canada’s economy would shrink nearly five times more, with Mexico experiencing an even greater loss. Retaliation could also spike inflation by an estimated 3-4 percentage points in Canada and Mexico, driving up costs.
History shows that no one truly wins a trade war, and smaller economies often lose the most, with retaliatory tariffs mostly inflicting collateral damage at home. This occurs through higher prices, lost jobs and disarray in supply chains. Simply put, escalation is costly and effectively hits a country’s own consumers in their wallets.
Strategic restraint
A better approach for Europe would be to use strategic restraint. This means refusing to mirror an aggressor’s tariffs and instead responding with measures that safeguard your economy without fuelling the spiral. This could involve providing targeted relief to industries hurt by US tariffs, for instance by subsidising affected industries or retraining displaced workers.
Rather than fixating on the US market, exporters in Europe, Asia and the Americas could deepen trade ties with each other. In the previous trade war, China responded not only with counter-tariffs but also by lowering tariffs for other trading partners to reduce reliance on the US.
While the trade war harmed China’s economy, lowering tariffs helped to keep its export machine running while the US began to isolate itself. In a similar fashion, Europe and others can sign new trade agreements among themselves, from Asia-Pacific partnerships to intra-European initiatives, to ensure growth isn’t held hostage by US protectionism.
Crucially, exercising restraint doesn’t mean doing nothing at all, it means acting smarter. Rather than fighting fire with fire, countries could invest in innovation and green industries, allowing them to seize ground as the US handicaps itself. Trump’s tariffs are already putting electric vehicle investment plans in the US at risk. If countries focus on building resilient supply chains for batteries, semiconductors and renewable energy components at home or with trusted partners, they can insulate themselves from future US trade wars.
There is also a diplomatic upside to restraint: the country that stays calm and constructive in the face of provocation often wins the moral high ground. Instead of being seen as part of a noisy trade brawl, a non-retaliating country can present itself as a defender of a free trading system.
This stance strengthens their hand in international forums, and it also quietly undercuts Washington’s position. While Trump may expect confrontation, restraint denies him the narrative and paints the US as the outlier. In short, strategic patience means choosing long-term economic stability over short-term symbolic punches.
Turning the pressure back on the US
If countries do not retaliate with their own tariffs, then American consumers and businesses will bear the full brunt of Washington’s protectionism. Shoppers in the US will quickly notice that imported cars, electronics and raw materials are more expensive and there will be no foreign tariffs to blame.
Without foreign retaliation, tariffs appear less patriotic and more like a self-imposed tax. US importers and manufacturers dependent on inputs like rare earth minerals will face higher costs, likely passing them on in the form of price hikes or layoffs. It is likely that US business leaders will eventually lobby against the tariffs. We saw glimpses of this in 2018-19, when American firms applied for thousands of tariff exemptions and farmers demanded aid.
In a scenario where allies exercise restraint, that domestic pressure would only intensify. Over time, the economic strain on the US could become considerable. It is estimated that if the world followed the US into protectionism, it would shave about 3% off US GDP permanently. In the hypothetical one-sided trade war scenario, the US wouldn’t lose all that growth at once, but it would certainly be harming itself while others move on.
In the longer term, America’s go-it-alone tariff strategy would erode its international standing. Allies and rivals alike may conclude the US is no longer a reliable economic partner, and respond not with tariffs, but with new alliances. Recent trade pacts like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and Regional Comprehensive Economic Partnership are already proceeding without US involvement, and this trend may deepen if Washington turns inward.
US exporters would eventually feel that squeeze. As others lower barriers among themselves, American companies will face relative disadvantages or find that global supply chains reorient away from them. Furthermore, the goodwill that the US built over decades of championing free trade would evaporate. Instead, Washington would attract criticism while getting little cooperation on its own trade demands.
The beauty of restraint as a strategy is that it lets the aggressor flounder in isolation. Americans will ask if higher prices at home and frayed ties abroad are worth it, and the pressure will mount internally for the US to relent. Effectively, standing aside allows America to “punch itself out” and let the instability brought by protectionism rebound back on the US economy and public, without dragging everyone into a damaging conflict.
Trade wars are loud, but silence can be louder. Not taking the bait amplifies the futility of unilateral tariffs. Eventually, the United States will have to confront the self-inflicted harm of its protectionism. And when it does, those who chose patience over provocation will be vindicated.
Note: This article gives the views of the author, not the position of EUROPP – European Politics and Policy or the London School of Economics. Featured image credit: © European Union
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