Tariff-proof solution

The European Union is the world’s leading trader. With a trade volume of €7.6 trillion in 2023 — 16.1% of global trade — the bloc has surpassed both the United States and China in terms of trade. Yet its two largest trading partners remain precisely those with which it does not have a free trade agreement, and this contradiction, especially in the case of the US, is rapidly turning from a strategic asset into an economic liability.

Under President Donald Trump, the United States has proven to be an erratic partner. Tariffs have once again been used as a tool of political pressure, and the transatlantic economy is already suffering from unprecedentedly high tariffs. Meanwhile, Germany, Europe’s industrial powerhouse, has felt the impact disproportionately. Worse still, a scenario of 20–25% tariffs on all goods is no longer a remote possibility, and could reduce EU exports to the US by 17.5% and shave 0.54% off European GDP. Replacing the €144 billion in lost exports will therefore require more than skillful diplomacy – it will require strategic reinvention and coordination between Member States.

Trade diversification is already underway. The EU-India Free Trade Agreement, which envisages drastic reductions in tariffs on products such as European cars, could boost bilateral trade to €167 billion by 2026. Similarly, a revitalised agreement with Mercosur could increase trade flows by 37%, particularly in the pharmaceutical and agricultural sectors. Combined with a new agreement with Mexico, the bloc could recoup €91 billion of US-related losses. Still, a €53 billion deficit would remain – unlikely to be bridged by external partnerships alone, given domestic and external political difficulties.

But the best path for Europe lies not beyond its borders, but within them: the Single Market—often praised, rarely completed—remains the continent’s most underutilized economic instrument. While goods flow relatively freely, services, capital and labour face persistent barriers. In the services sector, removing just half of the internal barriers could generate €279 billion a year. A truly integrated digital market would add another €415 billion, and that’s without counting integrated energy or capital markets. In total, completing the Single Market could free up as much as €1.1 trillion a year (according to estimates by the European Parliamentary Research Service and the European Economic and Social Committee), a figure that makes transatlantic trade losses manageable, if not negligible.

Unlike external trade agreements, which are subject to geopolitical tensions, internal integration depends solely on political will. A Polish plumber should not have to recertify to work in Belgium. A Portuguese start-up should be able to attract Dutch investment without encountering conflicting rules. Labour mobility, professional licensing and public procurement should be facilitated, not hindered.

Washington’s unpredictability and Beijing’s strategic opacity make it clear that the EU can no longer rely on bilateralism in a multipolar world. The Single Market, with its 450 million consumers and 22 million businesses, offers scale, resilience and sovereignty – but only if it is seen as a work in progress, not a finished product.

To withstand external shocks and assert its economic independence, Brussels needs to look inward. The question is not whether the EU can survive a new wave of US tariffs, but whether it can continue to delay completing its own market.

As Jean Monnet, one of the founding fathers of European integration, said: “Men accept change only in necessity and see necessity only in crisis.”

The crisis has arrived. It remains to be seen whether change will come in time.