China poses the toughest challenge for U.S. trade negotiators but accomplishing trade peace with the European Union is more important.

The EU is our largest partner for both exports and imports. Yet in terms of comparative advantages, our commerce with the continent makes little more sense than trade with China.

In 2024, the United States had a $237 billion merchandise trade deficit with the EU. Considering our sizeable agricultural and energy endowments and strengths in manufacturing technology, it’s a puzzle.

The trade gap with China is even larger but defenders note it has cheaper labor, an easier regulatory environment and nearly caught up with or surpassed the West in most critical technologies.

It’s hard to make a similar case for the EU.

Before the trade war, average tariffs were about the same—weighted by imports, 2.68% for the EU and 2.53% for the United States.

The real problems are with nontariff barriers—food safety standards, such as the EU ban on hormone treated beef and chlorine washed chicken, industrial technical regulations and safety standards and the like.

Many of these stem from reliance on the precautionary principle when crafting European rules.

The United States tends to regulate items scientifically verified to threaten or create a harm whereas in Europe, regulators try to anticipate unproven risks.

This was an issue in the World Trade Organization complaint on hormone treated beef. The United States prevailed but the EU endured WTO-authorized U.S. retaliatory tariffs until it reached a negotiated settlement.

The EU won’t let partners in trade negotiations alter its safety and environmental rules but it’s happy to dictate to others.

The EU ban on imports of goods produced on land deforested after 2020 that came into effect this year will impact on about one-third of Brazil’s shipments to the EU.

Effectively, Brussels is trying to force Brasilia to alter its domestic land conservation and forestry policies and enforcement.

Continental Europe has no tropical rain forests, and it’s reasonable to speculate if the European Commission will next take aim at water supply disruptions in U.S. shale oil and gas fields.

Estimates of the tariff equivalent impacts of EU nontariff barriers range up to 13%.

My experiences divining estimates of tariff equivalents for NTBs indicates these kinds of policies are often so amorphous that whatever figures we come up with tend to be too low.

The United States does enjoy a $76 billion surplus in trade in services but that’s not surprising, because the continental Europeans have only a small footprint in the high-tech space.

The Wall Street Journal counted 690 U.S. technology companies valued at more than $1 billion dollars with a combined value of $2.5 trillion. China has 162 valued at $702 billion and the EU only 107 valued at $333 billion.

In Chipmaking, the Netherland’s ASML makes much of the machinery used to manufacture cutting-edge semiconductors, like those designed by Nvidia and fabricated by TSMC in Taiwan.

But the EU lacks home grown analogs to Google, Amazon or Meta, and Apple’s market value is greater than the entire German stock market.

Yet, EU enforcers under legacy antitrust laws and the newer Digital Markets Act rigorously police these and other U.S. technology firms and have assessed some huge fines.

Trump’s team would like these regimes addressed as part of a trade deal. Yet just as the negotiations were getting underway in April, the EU Commission fined Apple $571 million and Meta $200 for DMA violations.

The U.S. would like the EU to take a tougher stance on China’s subsidized exports, so that Beijing cannot merely divert to Europe what U.S. tariffs shut out. Yet, Telsa’s sales are falling in Europe as BYD gains.

It’s tough to understand how China’s BYD can launch a $15,000 electric SUV without receiving massive government aid.

The Americans do have some unreasonable demands. European valued added taxes are not regarded by the WTO or mainstream economists as trade barriers

These are no different than our state sales taxes, but the Trump team wants something done about those. And to keep some U.S. tariffs on EU goods as part of a deal.

Putting those aside, the Americans are really looking for wholesale systemic change, whereas the EU approaches these talks as traditional irritant-by-irritant negotiation in the model of its deals with Mexico or Canada.

The Europeans see their regulatory and enforcement regimes as expressions of their continent’s unique values and culture.

In that sense, EU President von der Leyen is from Venus and President Trump is from Mars.

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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.