EU will likely adopt a more protectionist trade policy

Significance

The EU, concerned at the future of its own automotive industry, has threatened a ‘Buy European’ approach in response. Protection is rising as the WTO weakens and states target greater self-sufficiency, but the extent of this remains uncertain.

Impacts

• The growing desire for more protectionism will likely see Brussels make EU state aid rules more flexible.
• The respective legislative agendas in Washington and Brussels threaten to undermine the prospect of improved transatlantic trade relations.
• EU states are unlikely to be able to agree on a new subsidies regime that would offset the potential costs of IRA on EU competitiveness.