Brussels Edition: Dealing with Trump

EU leaders are scrambling to avoid a trade war with the US

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Welcome to the Brussels Edition, Bloomberg's daily briefing on what matters most in the heart of the European Union. EU leaders are scrambling to avoid a trade war with the US, following Donald Trump's threats to hit the bloc with tariffs. Polish Prime Minister Donald Tusk said yesterday that the 27-member bloc should "do everything to avoid" what would be a "totally unnecessary and stupid" commercial conflict. German Chancellor Olaf Scholz added that Europe has the capacity to react if Trump follows through. The comments come ahead of a meeting in Warsaw today of EU trade ministers, who will attempt to strike a unified position on bloc's response to the risks posed by the new administration in Washington — which may also lead to challenges for Americans. Meanwhile, Trump's comments that the UK might be spared highlights how Brexit could finally bring some benefits, even if it remains at the mercy of a "special relationship" that has been one-sided for decades. — Jorge Valero and Samuel Stolton

What's Happening

New Flexibility | Commission President Ursula von der Leyen said the bloc's executive arm will look into allowing member states more flexibility to use extra debt to finance defense spending. "For extraordinary times, it is possible to have extraordinary measures," she said. At an informal retreat, EU leaders came to no firm decisions about how to bolster their ability to counter threats from Russia and beyond. Shein Probe | EU regulators are readying a full-scale consumer law probe into Chinese-founded marketplace giant, Shein. The move follows a similar investigation into rival Temu and centers on the alleged sale of illegal products.  Euro Parity | The euro has only managed to trade at an equal value to the US dollar a handful of times. Economists now believe that the euro will fall to parity with the dollar, as fresh US tariffs loom large.   ESG Warning | Investors representing €6.6 trillion of assets are calling on European officials not to cave in to mounting pressure to scale back sustainability standards. Both France and Germany have been pushing for the EU to dilute its ESG ambitions.  Dirty Money | Raiffeisen Bank's clients in Russia have been making money from firms supplying Vladimir Putin's military, according to documents we've seen. EU officials say the bank probably has other customers supplying Russia's defense industry.

Around Europe

Heating Up | Romania's finance chief told us the government must make clear to voters the pitfalls of ditching the country's transatlantic orientation as it seeks to fend off a far-right surge, while bringing spending under control. Finance Minister Barna Tanczos took aim at right-wing candidate Calin Georgescu ahead of Romania's presidential election in May.  Greenland Pledge | Denmark is prepared to let the US military boost its presence in Greenland, Prime Minister Mette Frederiksen said. President Trump earlier insisted he wants to take control of the territory for security purposes.   Merz Pivot | Friedrich Merz, the front runner to become Germany's next chancellor, is shifting his campaign's focus to rebooting the nation's struggling economy. The pivot follows a clash last week over tougher immigration rules. Bayrou Blast | French Prime Minister Francois Bayrou forced the adoption of a 2025 budget bill by sidestepping the lower house of parliament. The move is likely to lead to a no-confidence vote in his leadership.   Musk Fall | Last month, Tesla sales plummeted 63% in France, the EU's second-largest EV market. The fall comes after Tesla boss Elon Musk becomes increasingly active in EU politics, throwing his support behind far-right groups.

Chart of the Day

Euro-area inflation surprisingly rose in January, supporting the European Central Bank's cautious approach to lowering interest rates while the sputtering economy faces intensifying tariff threats from the US. Consumer prices rose 2.5% from a year ago in January, while core inflation  stayed higher than anticipated at 2.7%, Eurostat said.

Today's Agenda

All times CET 11:30 a.m. Commission President von der Leyen speaks at EU Ambassadors Conference 2025.  Parliament President Roberta Metsola speaks at 9:30 a.m., Council President Antonio Costa at 2 p.m.  Defense Commissioner Andrius Kubilius meets Kongsberg CEO Geir Haoy EU digital chief Henna Virkkunen, EU foreign affairs chief Kaja Kallas, Home Affairs Commissioner Magnus Brunner meet UN High Commissioner for Refugees Filippo Grandi Economy Commissioner Valdis Dombrovskis meets European Banking Authority Chair Jose Manuel Campa EU trade ministers meet in Warsaw

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