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The European Union’s long-term aim to balance and somehow reconcile economic growth with social justice in all member states has been a cornerstone of EU policies in the last decades. Such an approach shaped basically everything, from trade liberalisation to labour market reforms. The last few years, with the numerous crises represented by the Covid pandemic, Russia’s invasion of Ukraine and its consequences on the European Continent, the rising cost of energy sources, and the skyrocketing inflation rates that come after, had a profound impact on social conditions across the member states. While the EU has achieved significant economic prosperity, many of the European citizens struggled to cope with all these crises and still fear for the future general stability of their respective countries on the financial side. 

The presidential elections in the United States represent another potential worry for European economies: the choices of Donald Trump and Kamala Harris could create problems or opportunities for the EU and influence the cooperation between the two sides of the Atlantic Ocean for the next future. The general framework of EU-US relations on the economic side has already been shaped by the Inflation Reduction Act (IRA), launched by Biden’s administration and enacted in August 2022. The IRA has had a particularly strong echo in the European Union, both in Brussels and in the member states, because of its clear intent to give the US global leadership in key green technologies. Many in Europe feared that the IRA would use local content provisions that may not be compatible with the rules of the World Trade Organisations (WTO). The discrimination against imports encrypted in the IRA has thus created a heated discussion about whether the EU needed to’respond’ to the US law. The discussion was also about the potential impact of the IRA on European producers and all the value chain in the EU, as well as rising prices for some commodities due to the competition on the global markets. Generally speaking, there are three main elements of the IRA that have been particularly criticised by the EU and the member states: the subsidy for electric vehicles that have been made available only for cars produced in North America, the measure that guarantees a 10% higher subsidy for renewables installations that use at least 40% of US products for their manufacturing inputs, and finally the generous support given to the domestic production of certain elements for batteries and renewables. Some analysis found that the real impact for European firms on the US market has been quite limited so far. 

Still, the “America first” ideology of Donald Trump represents a clear threat to European interests, as the former president already made clear during his first term at the White House. According to some observers, Trump’s trade policy could envision a general import tariff of 10% on European products, similar to goods from China. “Bloomberg” wrote that the Republican candidate could also assemble countermeasures against European digital service taxes if reelected. As for Harris, it is difficult to foresee what plans she could have on trade deals with the EU, but her policies may be more in line with those of Joe Biden. 

Written by: Francesco Marino