Beyond Retaliation: A Zero-Tariff Pact Is Europe’s Smartest Move

The EU should act – now – to offer and call for a zero-tariff agreement with the United States. It should put the proposal on the table unilaterally, without waiting for permission from Washington, and send a clear, loud signal to the world: Europe stands for trade, cooperation, and economic development. After years of drifting into its own protectionist habits, the EU must acknowledge that defensiveness is no longer credible. The only way to restore leadership and legitimacy is to lead by example – by making a bold, open offer for zero-for-zero tariff elimination.

This is the only credible and strategic response to Donald Trump’s latest tariff threat – a blanket 10 percent duty on all US imports, and a 20 percent levy on EU goods – which is already spooking markets and businesses on both sides of the Atlantic. The threat is as erratic as it is ideological, but the EU must not take the bait by simply preparing retaliation.

Yes, Europe must defend its interests – as Commission President von der Leyen has rightly said – and yes, it can and should ready countermeasures. But the more powerful message, and the one that could shift the global conversation, would be to lead with unprecedented ambition.

Proactively championing zero tariffs is not just a growth and economic development strategy – it’s also Europe’s smartest insurance policy. That is, after all, the original purpose of a rules-based trading order: to create mutual commitments that reduce the space for erratic, unilateral economic attacks and foster long-term stability.

Europe should return to being the champion of multilateralism and open markets – not just rhetorically, but through action. For too long, the global trade system has stagnated. The WTO’s relevance has eroded, its dispute settlement system remains paralysed, and according to the Global Trade Alert, protectionist measures have skyrocketed in every EU country over the past decade. Fair enough, no major Western economy has pushed for meaningful liberalisation since the 1990s.

Yet Europe itself has done little to push back. Peak tariffs remain high. The EU has flirted with overtly protectionist measures, such as the proposed Digital Services Tax – a tariff in all but name – and has adopted sweeping regulatory frameworks like the Digital Markets Act, which, by design, discriminate against non-EU companies. For all its talk of a rules-based order, the EU has not seriously advanced liberalisation since the 1990s. If Europe wants to be taken seriously as a global economic leader, it must do more than resist others’ protectionism – it must renounce its own.

It’s time to change course. One smart way forward is to revive sectoral ‘zero-for-zero’ tariff deals – like the 1994 Pharmaceutical Agreement – and expand them to strategic sectors such as clean tech, AI, or electric vehicles.

A much smarter idea – and a quick fix with powerful signalling effects for the developing world – would be to launch a zero-tariff US-EU trade initiative. Even Trump-aligned figures like Elon Musk are now publicly calling for it. And rightly so – it offers a far more compelling vision than reactive protectionism. Europe should seize the initiative. A transatlantic zero-tariff agreement is not only politically timely – it is economically sound. While average tariffs may seem low, they still distort trade, especially in sectors dominated by intra-firm and intra-industry exchange. Eliminating them could unlock substantial gains, boost competitiveness, and inject fresh momentum into the global trading system. Far from sidelining the WTO, such a bold initiative could reinvigorate multilateralism and set a high-standards benchmark for others to follow.

This is not naïve idealism – it’s economic diplomacy rooted in both empirical evidence and confidence in the benefits of non-discriminatory trade. By leading with a proposal for zero tariffs, the EU can shape the terms of debate, reassert its commitment to the rules-based order, and offer a positive alternative to tit-for-tat protectionism. Such a move would be good for European exporters, good for consumers, and good for the world.

The EU can no longer hide behind a defensive crouch – not least because its own protectionist agenda has undermined its credibility. It should now lead by example and put forward a bold zero-for-zero tariff initiative.