Tricks of the Trade

The current US-Canada spat is not an isolated dispute but the latest instance of the Trump administration's coercive use of trade as a tool for asserting power over a former friend. It is also a preview. This fall, the same playbook could turn on Europe.

Washington's approach to Ottawa—a G7 peer, NATO ally, and United States-Mexico-Canada Agreement (USMCA) partner—shows that alliance status affords no exemption. If anything, it sharpens the White House's resolve to extract concessions on long-standing irritants. The EU should expect the same treatment and, in light of the Pentagon’s ongoing review of US force presence in Europe, on more fronts. Economic damage and midterm elections are not a brake on the president’s use of tariffs to achieve broader objectives.

Two flashpoints are already visible. First, now that the reset of US-EU tariffs has been largely resolved, implementation of the Turnberry framework will turn to the regulatory issues that were deferred. "Non-tariff barriers" on environmental and other regulatory rules will be the focus, and the Trump administration will be looking for resolutions to festering issues. Expect Washington to claim Europe is not fulfilling its responsibilities, while Europe (like Canada) will claim that it has the sovereign right to regulate its markets as it sees fit.

The second is digital oversight and regulation. The Digital Markets Act, the Digital Services Act, and enforcement of the General Data Protection Regulation have produced, and will keep producing, fines against Apple, Meta, Google, and X. The administration has already treated these penalties as disguised trade barriers targeting American companies. Section 338 of the Tariff Act of 1930, the rarely used provision permitting tariffs against countries that discriminate against US commerce, has been floated in Washington precisely for cases such as this. Now that it has been used against Canada, applying it to Europe gets easier.

Brussels faces challenges similar to Ottawa's. EU member states and the European Commission, under political pressure from Washington, will face internal differences. Add to this a complicated shift in the EU-China relationship and the bloc’s internal complexities that the United States could leverage.

As supply chains brace for an extended trade war between the United States and Canada, Europe should not wait for the White House to turn its attention to the other side of the Atlantic. Technical changes that align with the Turnberry concessions should be prepared, as well as a reaction to another Section 338 announcement. Before Trump renames the Atlantic Ocean to the America Ocean, there is still room to negotiate an armistice rather than absorb one.

The views expressed herein are those solely of the author. GMF as an institution does not take positions.