Why Europe Is a Reluctant Trade Warrior

Many question whether the European Union has the raw power – as well as the willpower -- to engage in the trade war President Donald Trump has started with much of the rest of the world. But the matter is more complex for Europe than who can emerge victorious from an exchange of blows.

A purely economic cost-benefit analysis would probably show that it makes sense for Europe not to react to Trump’s moves at all. If Europe does engage in a costly tit-for-tat exchange, it’ll be to defend a global trade system whose failure, according to a recent estimate by economists Alessandro Nicita, Marcelo Olarreaga and Peri da Silva, would lead to a 32 percentage point increase in average tariffs.