As the European Union (EU) assesses its strategy in response to the recent tariffs imposed by former President Trump, which include a significant 25% levy on steel and aluminum, new avenues for negotiation are emerging. A recent report by Goldman Sachs indicated that leveraging pressure on US technology companies is one approach the EU might explore in its discussions with the US.
EU’s Digital Markets Act and Tech Oversight
The EU’s Digital Markets Act has led to numerous investigations targeting American tech giants, which experts believe could serve as negotiation tools to achieve better trade agreements. Acknowledging the EU’s heavy reliance on US technology, there is a growing ambition to foster independent AI capabilities, drawing parallels to the US’s Project Stargate initiative.
In commenting on the issue, former Google CEO Eric Schmidt emphasized the importance of government oversight in the development of AI models by private tech firms. However, he cautioned against excessive regulation that could hinder innovation. Schmidt also expressed concerns about US semiconductor export controls aimed at preventing adversaries from accessing advanced technologies
Potential for EU Retaliation
With ongoing trade tensions between the US and its allies, EU policymakers are increasingly concerned about how aggressively the US might pursue these tariffs or impose further export controls that could affect Europe’s aspirations for sovereign cloud and AI technologies. The question remains whether the EU would retaliate by introducing tariffs on US technology.
Carsten Brzeski, the global head of macro at ING, and senior economist Inga Fechner discussed the implications of a potential trade war. They pointed out that countries with trade surpluses, like the US, often face greater risks in such conflicts. They suggested that Europe should look to bolster its domestic economy rather than engage in tit-for-tat tariffs.
EU’s Competitiveness Compass
In late January, the European Commission unveiled its Competitiveness Compass, outlining a forward-looking industrial strategy aimed at fostering technological advancement within the EU. This strategy envisions a continent that leads in the development of new technologies, manufacturing processes, and products while achieving climate neutrality.
The foundation of this initiative is based on the findings of the Draghi report authored by Mario Draghi, the former president of the European Central Bank. The European Commission aims to create an ecosystem that nurtures innovative startups and reinforces industrial leadership in cutting-edge sectors.
Accelerating AI Development
The strategy includes the establishment of AI gigafactories aimed at enhancing the development and adoption of AI across critical sectors. Furthermore, a robust startup and scale-up strategy is being prioritized to eliminate barriers that hinder the emergence and expansion of new companies.
To simplify operations and reduce costs for innovative businesses, the EU is proposing a comprehensive legal framework that would standardize rules across various fields, including corporate and tax law. This initiative aims to create a more favorable environment for investment and operations within the Single Market.
Recently, European Commission President Ursula von der Leyen announced the launch of InvestAI, which aims to mobilize €200 billion for AI investments, including a dedicated €20 billion fund specifically for AI gigafactories. This ambitious public-private partnership has been likened to “CERN for AI” and intends to support the development of large-scale AI models.
The InvestAI fund will facilitate the establishment of AI gigafactories throughout Europe, each equipped with approximately 100,000 next-generation AI chips. There are ongoing discussions about the definition of “next-generation AI chips,” but it has been shown that older AI hardware can still yield results comparable to those of leading US firms, suggesting potential paths forward for EU technology ambitions.
In this rapidly evolving landscape, the EU is intent on reinforcing its technological independence while navigating the complexities of international trade relationships.