Tariffs, Sanctions and Europe’s Dilemma

The reported decision of US President Donald Trump to impose one hundred per cent tariffs on all imports from China and India, framed as secondary sanctions upon their continued purchase of Russian hydrocarbons, raises a profound question for European capitals. The United States is said to be demanding that Europe mirror this move if the measure is to be sustained. Were the Europeans to accede, they would trigger one of the most dramatic ruptures in global trade since the Second World War. Whether it is in Europe’s interests to do so requires a careful analysis of economics, politics and strategy.

The Strategic Rationale

At the heart of the proposal lies the attempt to deprive Russia of the foreign exchange she accrues from the sale of oil and gas to two of the largest emerging markets. Russia’s war against Ukraine has been underwritten by continued energy revenues from buyers willing to defy Western sanctions. Secondary sanctions are intended to sever this lifeline by raising the costs of continued commerce with Moscow. If both the United States and Europe, representing the largest consumer markets, were to cut imports from China and India in response to their oil purchases from Russia, the economic leverage applied might be decisive.

The Economic Costs to Europe

Yet Europe has a more immediate reliance upon imports from both China and India than the United States does. China is Europe’s second-largest trading partner, supplying critical manufactured goods, electronics, renewable energy components, and intermediate inputs vital for industry. India, while a smaller player, is increasingly significant in pharmaceuticals, services, and textiles. A blanket one hundred per cent tariff would amount to near-prohibition of these imports. The inflationary shock, disruption to supply chains and damage to Europe’s industrial competitiveness could be immense. For Germany’s automotive sector, France’s aerospace industries, and the continent’s broader energy transition, the consequences might be dire.

Political Unity and Divergence

The European Union has prided herself on a degree of unity in sanctions policy against Russia. But the more biting the sanctions, the more cracks appear. Hungary and Slovakia continue to import Russian hydrocarbons themselves, undermining credibility. It is difficult to see such states consenting to tariffs that punish India and China for behaviour in which they themselves engage. Even within larger states, political factions are sensitive to the risk of alienating Asian partners at a moment when Europe’s relations with the Global South are already strained by perceptions of hypocrisy.

The Diplomatic Consequences

Should Europe join the United States, the geopolitical realignment would be clear: a full economic rupture with China and India, pushing them more decisively into Russia’s orbit. Europe would sacrifice her ambitions for autonomous engagement with two of Asia's principal powers, and the prospect of using trade ties as leverage to moderate Beijing and New Delhi would vanish. Conversely refusing to join the United States might risk transatlantic discord, with Washington accusing Europe of undermining a maximalist sanctions regime.

Balancing Interests

Europe’s choice, therefore, is between unity with Washington at the cost of her own prosperity, and the preservation of vital trade flows at the cost of appearing weak against Russia. The calculus is not straightforward. Europe cannot afford unlimited sacrifice of economic wellbeing; her domestic publics are weary of inflation and industrial decline. Yet she also cannot afford to be seen as the weak link in the Western alliance confronting Moscow.

A Middle Path?

A possible compromise might be for Europe to tighten enforcement of existing sanctions, including stronger action against Russian hydrocarbons shipped through third countries, without adopting a blanket tariff regime. Targeted measures, such as tariffs on specific sectors or dual-use goods, may balance pressure upon China and India while avoiding catastrophic disruption to Europe’s own industries. Such a course would enable Europe to present herself as committed to Ukraine’s defence while safeguarding her economic base.

Historical Precedents: The Iranian Example

The present debate is not without precedent. In the 2010s, the United States imposed secondary sanctions upon Iran with the aim of isolating Tehran from global markets. These sanctions targeted not only Iran’s oil exports but also foreign companies and banks that facilitated Iranian trade. Europe resisted fiercely at the time, regarding such measures as an infringement upon her sovereignty and a violation of international law. The European Union even revived a 1996 statute designed to shield European firms from the extraterritorial reach of American sanctions.

Nevertheless the sheer weight of the American market and the dominance of the US financial system left European businesses with little choice. Many quietly complied with Washington’s demands, fearing exclusion from dollar-denominated markets and transactions. The precedent illustrates how European opposition to US secondary sanctions can be principled in rhetoric yet ineffective in practice, given the asymmetric power of the United States. The same risk would apply were Trump to enforce tariffs against China and India while demanding Europe’s alignment.

The Lessons of the Cold War

A second historical parallel may be drawn with the Cold War. Then, the United States frequently urged her allies to restrict trade with the Soviet Union, including technology embargoes under the Coordinating Committee for Multilateral Export Controls (CoCom). European states, particularly France and West Germany, often resisted, seeking to preserve channels of economic engagement with Moscow as a hedge against confrontation. These disputes illustrated the recurring tension between strategic discipline and economic pragmatism within the Western alliance. In the end, CoCom was maintained, but only through constant negotiation and compromise.

What These Comparisons Teach

Both historical cases suggest that Europe has a strong tradition of resisting the most extreme forms of US secondary sanctions, even when ultimately bowing to American pressure in practice. They also highlight the risks of overreach: the more aggressive Washington’s demands, the greater the chance of European resentment, divergence and eventual political backlash. Europe is unlikely to agree in unison to tariffs as sweeping as those proposed. More probable is a muddled middle ground, where some member states seek accommodation with Washington, others resist, and the Union as a whole emerges divided and hesitant.

Likely European Divisions

If Trump’s tariff policy were to move from rhetoric to reality, Europe’s internal divisions would quickly surface. Germany, heavily dependent upon imports of Chinese manufactured components, is unlikely to support a one hundred per cent tariff regime. Berlin would instead press for narrower measures focused upon sanction circumvention, while warning of industrial collapse if supply chains were cut overnight. France might be more open to symbolic alignment with Washington, but Paris would also guard her own aerospace and luxury exports to China, which represent a key plank of her economy. Italy, with deep infrastructure and energy links to both Beijing and New Delhi, would likely join Germany in resisting.

By contrast, Poland and the Baltic States might lean towards the American position, calculating that strategic unity against Russia outweighs economic cost. These countries have historically placed national security above commercial calculation in their dealings with Moscow, and they would regard alignment with Washington as insurance against any weakening of NATO commitments. Yet even here domestic industries dependent on cheap imports would push back.

Hungary and Slovakia, both still importing Russian hydrocarbons directly, would almost certainly refuse. Their obstruction could paralyse any attempt to forge a unanimous European Union position, leaving the Commission unable to legislate collective tariffs without fracture. The likely result would be a patchwork of policies: some states aligning with Washington, others openly defying her, and Brussels caught in the middle.

Best Case Scenario

Europe manages to forge a carefully negotiated compromise with Washington. Instead of matching Trump’s one hundred per cent tariffs, the EU introduces a suite of targeted secondary sanctions: restrictions on re-exports of sensitive technologies to Russia via China and India, enhanced scrutiny of financial transactions, and limited tariffs on dual-use goods. This allows Europe to demonstrate solidarity with the United States and Ukraine, while avoiding a trade rupture that would devastate her industries. European unity is preserved, and transatlantic relations remain intact, though tensions simmer beneath the surface.

Worst Case Scenario

Trump presses ahead with his tariffs unilaterally and threatens punitive action against European firms that fail to comply. Washington insists upon full alignment, and when the EU hesitates, the United States imposes extraterritorial measures that cut European banks and exporters off from the American market. Europe fractures: Germany, Italy and several others refuse to comply, while Poland and the Baltics seek bilateral alignment with Washington. China and India retaliate by redirecting exports away from Europe, accelerating their integration with Russia. The EU’s internal cohesion collapses, her economy plunges into recession, and transatlantic unity shatters.

Most Likely Scenario

Europe stalls for time, unwilling either to defy Trump outright or to embrace his maximalism. Negotiations drag on, with some states adopting symbolic tariffs and others quietly ignoring the American call. The European Commission proposes incremental tightening of sanctions enforcement, but avoids blanket tariffs. Washington tolerates this halfway house, realising that a fractured alliance would serve Russia more than a partially effective sanctions regime. The result is an uneasy compromise: Europe pays a political cost in appearing hesitant, but her economy is shielded from catastrophic disruption. Russia continues to benefit from Chinese and Indian purchases of her oil and gas, although at reduced margins.

A careful calculation

It is not in Europe’s immediate economic interests to follow Washington in imposing one hundred per cent tariffs on all imports from China and India. The costs would outweigh the benefits, and the unity of the European project itself might fracture under the strain. Yet neither can Europe afford to be inert. A carefully calibrated strategy, less extreme than Washington’s demands but more robust than current practice, represents the only viable course. To act otherwise would risk either impoverishing Europe or abandoning Ukraine to her fate.

History suggests that Europe will resist the most extreme American demands, but ultimately seek compromises that preserve the alliance while minimising economic self-harm. The best that can be hoped for is a middle path, the worst a rupture of Western unity, and the most likely outcome yet another messy European compromise that reflects the limits of her collective political will.