President-elect Donald Trump has issued a stark ultimatum to the European Union, threatening sweeping tariffs unless the bloc reduces its trade deficit with the United States through large-scale purchases of American oil and gas. Trump's announcement, made early Friday morning on Truth Social, has amplified tensions between Washington and Brussels, setting the stage for a potential trade clash as he prepares to assume office in January.
"I told the European Union that they must make up their tremendous deficit with the United States by the large-scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way," Trump posted, doubling down on his longstanding criticism of global trade imbalances.
According to U.S. data, the goods and services trade deficit with the EU reached $131.3 billion in 2022. While the U.S. maintains a surplus in energy and services trade with the EU, the deficit in goods - particularly machinery and vehicles - remains substantial, totaling over $106 billion in 2023.
EU leaders have responded cautiously, signaling a willingness to engage in dialogue while underscoring the deeply integrated nature of transatlantic trade. "The EU and U.S. have deeply integrated economies, with overall balanced trade and investment. We are ready to discuss with President-elect Trump how we can further strengthen an already strong relationship, including by discussing our common interests in the energy sector," European Commission spokesperson Olof Gill told CNBC.
However, former Italian Prime Minister Enrico Letta urged the EU to prepare for potential retaliation, describing Trump's approach as "transactional" and suggesting that Europe might need to respond in kind. "If the deal is proposed by Trump-such an asymmetric deal on topics that are not linked one to the other-I think we have to do the same," Letta said on CNBC's "Squawk Box Europe."
Trump's ultimatum comes as the EU works to phase out energy imports from Russia and diversify its energy supply. European Commission President Ursula von der Leyen recently emphasized the bloc's intention to increase U.S. energy imports, citing their cost-effectiveness compared to Russian liquefied natural gas.
Meanwhile, Trump's rhetoric reflects his broader protectionist stance, which has also targeted other key trading partners, including Canada, Mexico, and China. In November, he proposed a 10% tariff on Chinese goods in response to alleged failures to curb fentanyl trafficking and signaled plans for a 25% tariff on Canadian and Mexican exports.
Economists and analysts have raised concerns about the potential fallout of Trump's tariff threats, warning that such measures could exacerbate inflation and disrupt global trade. Christine Lagarde, president of the European Central Bank, has cautioned against retaliation, advocating instead for increased U.S. imports to mitigate tensions.
Despite the uncertainty surrounding Trump's intentions, the EU appears to be bracing for a more confrontational relationship with Washington. European leaders have reportedly spent months preparing contingency plans for a shift toward U.S. protectionism.
The stakes are high, given the significant economic ties between the two powers. U.S. exports to the EU totaled $350.8 billion in 2022, while imports from the EU reached $553.3 billion, making the EU one of America's largest trading partners.
