Tariff rift: Will Trump's tariffs force the EU to reduce defense spending

European countries' defense plans are unlikely to change amid Trump's decision to impose 20% duties on EU goods, experts believe. Moreover, it will benefit the European military-industrial complex and accelerate the strategic isolation of Europe. The day before, EU defense ministers confirmed the bloc's readiness to spend 800 billion euros on defense over four years. At the same time, EU leaders acknowledge that tariffs will hit many sectors of the economy, such as the automotive industry, pharmaceuticals, and woodworking. According to economists, as a result of the introduction of duties, the losses of the European Union will amount to at least 1-2% of its GDP.

Macron promises European response to US tariffs

Trump's 20% tariffs on EU goods are a "cruel and unjustified decision" that will have a "huge impact" on the European economy. French President Emmanuel Macron said this on April 3 at an emergency meeting with representatives of industries that could be most affected by the measures taken by the American administration. The head of the Fifth Republic promised to give a "first response" to the tariffs imposed on steel and aluminum from the EU in mid-April. For other sectors, European countermeasures will be presented at the end of the month. The European Commission, in turn, confirmed that the response to the duties will be agreed at a meeting of trade ministers on April 7.

In any case, the French budget will suffer losses as a result of the tariffs. The winemakers alone estimated the possible losses at €1 billion. The dairy and perfumery sectors are also missing out on profits.

A new round of trade war between the United States and the EU is taking place against the backdrop of attempts by the bloc's countries to significantly increase their military potential by multiplying defense spending. On April 2, European Commissioner Andrews Kubilius said that Brussels wants to spend 800 billion euros over four years on the bloc's defense. At the same time, 650 billion euros should be donated by the EU member states, and the remaining 150 billion euros should be allocated as a loan.

In general, analysts predict that for the European Union, the US duties will mean a loss of at least 1-2% of GDP. Weakened by the effects of anti-Russian sanctions, the EU economy is in a much more vulnerable position today than during the first term of US President Donald Trump in 2017-2021, when he imposed the first tariff restrictions on trade with the EU. The main "locomotives" of unification, Germany and France, have particular problems with economic growth.

The attempt of the previous French Prime Minister Michel Barnier to reduce the budget deficit ended with a vote of no confidence in him. The new government of Francois Bayrou is also hanging by a thread due to the trial of Marine Le Pen and a possible new vote of no confidence, which her National Unification party may vote for. Despite this, Macron wants to double the French defense budget by 2030, which today reaches €50.5 billion per year. And he plans to do this without increasing taxes and in conditions of a shortage of state finances. As usual, loans will come to the rescue, which will only increase the national debt.

And yet, given Trump's policy towards Europe, the EU will in any case try to pump up its military-industrial complex in order to resist Russia, help Ukraine and become an independent center of power in world politics, which, by the way, is what Macron dreams of, Sergei Fedorov, a leading researcher at the Institute of Europe of the Russian Academy of Sciences, told Izvestia.

— Now is a good time for Europe to do this. And they will try to find money for defense even to their own detriment, because, from their point of view, their survival is at stake," Fedorov added.

How will the duties affect the German military-industrial complex

Moreover, they will not abandon the current defense policy and the German government, which is in a better position than France in terms of public debt. Speaking on April 3 before the summit of NATO foreign ministers, German Foreign Minister Annalena Burbock said that the day of the imposition of duties had become a "day of unity" for Europe.

"As NATO partners, we will continue to expand the European component of security — 800 billion euros over four years will strengthen our own security," she added.

Friedrich Merz, the leader of the Christian Democratic Union (CDU), which won the parliamentary elections, plans to create a loan-funded special fund in the amount of 500 billion euros for the next ten years. To do this, he has already been able to pass amendments to the Constitution through the Bundestag of the old convocation, which will increase the volume of public debt and increase defense spending, among other things.

American duties will primarily affect civilian products in the automotive and machine-building sectors and will not affect the German military-industrial complex in any way, Vladislav Belov, head of the Center for German Studies at the Institute of Europe of the Russian Academy of Sciences, explained to Izvestia.

— The German military-industrial complex will develop. Moreover, if the EU imposes import duties on groups of goods that are part of the value chain of military products, this will only strengthen the competitiveness of the German military-industrial complex. Government orders play a crucial role for the military-industrial complex. In this sector, German manufacturers will only be happy if they are protected from American military products," he said.

Northern Europe will not abandon its defense strategy

The negative effect of the duties will also be felt in the Nordic countries. Sweden's Minister of Foreign Trade and International Cooperation, Benjamin Dusa, confirmed that "the United States is one of our most important markets."

— There are certain sectors that are particularly dependent on the American market: first of all, we are talking about our car exports, on which more than 100,000 people depend. Then it's the export of pharmaceutical products and lumber," he explained.

The United States occupies an important position in the export structure of the Nordic countries, but these countries will not abandon their current defense strategy, Nikita Lipunov, a junior researcher at MGIMO, confirmed to Izvestia.

— In the defense sector, the Nordic countries are guided by a different logic than the logic of economic expediency. Their perception of threats is that economic difficulties will not affect the increase in military spending. Especially when it comes to the "Russian threat" in the perception of Finns, Norwegians, Swedes, and to a lesser extent, Danes," he said.

The case of Finland clearly shows that in this country the interests of national security have taken precedence over economic interests in recent years. This country has almost completely severed ties with neighboring Russia.

Meanwhile, the Finnish authorities cannot ignore the dynamics of events in the SVR zone and in Russian-American relations. It is significant that at the end of last week, President Alexander Stubb made an unofficial and unannounced visit to the United States to meet with Donald Trump. After that, at a meeting with the British Prime Minister, he stressed that Europe needs to "mentally prepare" for the restoration of political relations with Russia.

"In the long term, it is important for Finland to maintain a political dialogue with Russia despite disagreements, besides, Moscow has always remained open to dialogue, and the break in relations occurred on the initiative of the Finnish side," concluded Nikita Lipunov.

The crisis in relations between the United States and Europe

The new duties complicate the already difficult relations between the new US administration and the European Union. Since the beginning of his new presidency, Trump has repeatedly repeated that the United States' policy towards the EU was too soft and went to the detriment of the country's economy. This includes accusations that Europe has not spent enough money on defense all these years, unlike the United States.

U.S. Secretary of State Marco Rubio confirmed at a meeting with NATO allies on April 3 that the alliance's countries, including the United States, should commit to increasing defense spending to 5% of GDP. At the moment, Poland has come closest to this goal, which donates 4.12% of GDP to its defense capability. The United States itself spends 3.38% of GDP on defense. Greece, Latvia and Estonia also spend more than 3% on defense. Eight countries — Belgium, Spain, Italy, Canada, Luxembourg, Portugal, Slovenia and Croatia — could not even reach the target of 2% of GDP, which was agreed back in 2014.

Finally, the cooling of relations between Washington and Brussels was influenced by Trump's decision to resume dialogue with Moscow, which fundamentally contradicts the EU's policy of isolating Russia and continuing the conflict in Ukraine.

On April 3, Kremlin spokesman Dmitry Peskov told Bloomberg that Russia would like to continue working with the United States to resolve the Ukrainian crisis. "Everyone prefers not to fight, but to talk, and not only to talk, but also to be heard. This is exactly the situation we have with the current American administration," he explained.