EU Insight Brussels, 8 November 2024

Brussels, 8 November 2024

TRUMP´S US ELECTION VICTORY CALLS FOR THE EU STEP UP

While not necessarily a surprise, Donald Trump’s triumph in the US elections has shocked many in the EU. With Republicans controlling both the House and Senate and with a Republican-dominated Supreme Court, Trump’s second term will give him a freer rein to develop his policy and campaign promises, many of which will have an important impact on the EU. For one, Europe will have to take more responsibility for its defence, after decades of relying on the US’ unwavering support, support which may now be at risk. The EU will also have to be ready to toughen up its trade policy given potentially increased US protectionism, and likely revisit its “de-risking” approach towards China. To read more about how the EU should tackle the fallout of the US elections, find blogposts from our Senior Advisors Krišjānis Kariņš and Henne Schuwer here and here.

GERMAN GOVERNMENT COALITION COLLAPSES WITH FIRING OF FINANCE MINISTER

German Chancellor Olaf Scholz announced the dismissal of Finance Minister Christian Lindner this week, leading to the dissolution of the ruling three-party government coalition. The so-called traffic light coalition struggled to find common ground throughout its three-year tenure since 2021, so its collapse was not surprising. Still, its timing alongside Trump’s election is far from ideal for the EU’s stability. Scholz’s socialists will remain in a minority government coalition with the Greens, until a no-confidence vote which is currently scheduled for 15 January 2025, despite opposition and industry asking for an accelerated timeline. Snap elections would follow the vote, likely in March.

COMMISSIONER HEARINGS IN EUROPEAN PARLIAMENT: PART 1

The confirmation hearings of the 26 Commissioners-designate started this week, and will conclude on 12 November with the appearance of the six Executive Vice Presidents in the European Parliament. While the majority of hearings went rather smoothly, with MEPs endorsing all but one candidate’s (Swedish Commissioner, Jessika Roswal) abilities and policy expertise. Eventually, she was endorsed, leaving the Hungarian Commissioner-designate, Olivér Várhelyi, as the only candidate to be requested for a second hearing, with MEPs dissatisfied with his first one. If in the end he is also endorsed and all goes smoothly with next week’s hearings, the new College of Commissioners will be officially elected on 27 November.

NIINISTÖ REPORT OUTLINES PATH FORWARD FOR EU DEFENCE SECTOR

Last week, the European Commission published a report by the former Finnish President, Sauli Niinistö, on the EU defence sector. Acting as a special adviser to the Commission, Niinistö assesses the state of the EU’s defence sector, highlighting its priorities, degree of readiness in the face of a crisis, and potential related risks, in a 165-page analysis which delivers 80 recommendations for the sector. A key element of the report addresses the sector’s financing needs, on which Niinistö suggests creating an EU Preparedness and Readiness Investment Framework and increasing the European Investment Bank’s involvement in defence funding. In addition, Niinistö proposes to leverage private capital through preparedness-centred financial products

EU IMPOSES TARIFFS ON CHINESE EVs AND TESLA IS CAUGHT IN THE CROSSFIRE

The Commission officially concluded its anti-subsidy investigation on Chinese electric vehicles’ value chains, last week, with the imposition of definitive tariffs on imported EVs. The tariffs aim to protect the European EV manufacturing industry from anti-competitive behaviour arising from unfair subsidisation. These tariffs range from 17%-35.3% for car manufacturers BYD, Geely, and SAIC, with other cooperating companies facing a 20.7% tariff. After a special examination, Tesla will be subject to a 7.8% duty. Despite the tariff imposition, the Commission remains committed to continuing negotiations with China, aiming to find alternative solutions. If that fails, the tariffs will be in effect for five years with potential extensions after a review.

COMMISSION OPENS INVESTIGATION AGAINST TEMU OVER BREACH OF DSA RULES

The Commission has launched a formal investigation against Temu under the Digital Services Act (DSA), over the sale of illegal products on its e-commerce platform. The scope of the investigation, goes well beyond said products, as EU enforcers will also scrutinise the alleged use of addictive mechanics and gamification on Temu’s app, Temu’s system to recommend products to users, and the company’s compliance (or lack thereof) with the DSA’s obligation to provide public data to researchers. In case of non-compliance, Temu could face a fine of 6% of its global turnover. A significant blow to the Chinese retailer, in an investigation which is seen as a test case for the effectiveness of EU rules on digital services.

COMING UP NEXT WEEK

• 11-22 November: UN Climate Change Conference Baku (COP29).
• 13 November: College of Commissioners. On the agenda: e-Declaration for the posting of workers.
• 13-14 November: EP Plenary: US elections impact on EU. EU Deforestation Regulation.
• 15 November: Economic and Financial Affairs Council. On the agenda: Union budget for 2025.

Tuomas Tierala, Managing Partner Brussels, Kreab

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Kreab • Tel: +32 2 737 6900 • tuomas.tierala@kreab.com • www.kreab.com/brussels • X: @KreabEU  •  LinkedIn: Kreab Worldwide

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