If it comes to a stand-off, Europe has leverage over America

Subscribe to enjoy similar stories. “THE ACTION that is needed has to be bold and determined," declared Ursula von der Leyen, the president of the European Commission, this week. She was talking about how the European Union should respond to Donald Trump’s habit of tearing up supposedly “ironclad commitments", thereby threatening “European values".

“Extraordinary times," she averred, “call for extraordinary measures." So far, the EU’s response to Mr Trump has been fairly ordinary. After America imposed a 25% tariff on steel and aluminium on March 12th, it said it would charge punitive levies on €8bn ($9bn) of American imports from April 1st and on a further €18bn of imports from mid-April. Despite Mrs von der Leyen’s fighting talk, Europe does not want its row with America to escalate and hopes Mr Trump’s worst instincts can be moderated.

But were the EU’s disputes with America to intensify, it does have a surprising number of ways to exert pressure on its wayward ally. The EU’s most obvious geopolitical asset is the size of its market. Together with Britain, Norway and Switzerland, the continent’s GDP reaches $24.5trn, almost as big as America’s $29trn.

American firms, from brewers to banks, would like to continue doing business in that market. That is the premise of Europe’s retaliatory tariffs, which will fall initially on easily substitutable luxury goods, such as Harley-Davidson motorcycles and whisky. The hitch is that tariffs or other restrictions on imports from America hurt European consumers as well as American exporters.

A case in point is Europe’s biggest import from America, energy. Last year it gobbled up 35% of America’s exports of crude and refined oil. More than half of America’s LNG went to Europe, too.