The Price of Appeasement
"You were given the choice between war and dishonor. You chose dishonor, and you will have war." Winston Churchill delivered these words on 5 October 1938, in the aftermath of the Munich Agreement, condemning the policy of appeasement adopted by the British Government. Nearly 90 years later, the legal context has changed completely. The underlying dilemma has not. Concessions offered in response to coercion may reduce immediate tensions, but they do not necessarily remove the incentive to continue exercising pressure.
Tariffs as a Geopolitical Tool
Recent developments in transatlantic trade relations illustrate this dilemma. The United States has progressively transformed tariffs from instruments of commercial policy into instruments of geopolitical negotiation. Rather than pursuing the traditional objectives recognized under WTO law — including addressing unfair trade practices and protecting public health, the environment and national security — tariffs are increasingly used to advance broader strategic objectives, including economic security, industrial policy, supply-chain resilience and geopolitical leverage. Tariffs have therefore moved from the margins of trade law to the center of contemporary international relations.
This transformation has also altered the constitutional balance within the United States. Although the Constitution entrusts Congress with the power to regulate foreign commerce and impose customs duties, the second Trump Administration relied extensively on executive authority, particularly the International Emergency Economic Powers Act of 1977 (IEEPA), to impose general tariffs affecting virtually all trading partners. In February 2026, the US Supreme Court held that IEEPA did not authorize the imposition of tariffs and ordered the reimbursement of duties unlawfully collected. The administration consequently shifted away from general emergency-based tariffs towards other statutory bases: temporary reliance on Section 122 (authorizing temporary import surcharges of up to 15% for a maximum of 150 days, subsequently also invalidated by the courts), continued use of Section 232 (authorizing tariffs on imports deemed to threaten national security) for sectoral measures, and increasing reliance on Section 301 (authorizing unilateral trade measures in response to foreign acts, policies or practices deemed discriminatory or unreasonable). The legal basis evolved; the strategic function of tariffs did not.
The European Union’s Response
Rather than insisting on the legal consequences of the US tariff measures, the European Union chose to negotiate a political settlement with the United States. Regulation (EU) 2026/1455, implementing that settlement, presents it as a means of strengthening the transatlantic partnership, restoring certainty in bilateral trade and reaffirming the EU's commitment to the multilateral trading system. Yet the Regulation simultaneously grants preferential tariff treatment exclusively to the United States, notwithstanding the absence of a comprehensive free trade agreement and the exclusion of significant sectors such as steel and aluminum.
The Regulation therefore raises a fundamental WTO issue. By granting tariff preferences exclusively to the United States, it departs from the most-favored-nation (MFN) principle embodied in Article I of GATT. Since such preferences are permitted only within customs unions or free trade agreements under Article XXIV of GATT, the legal basis of the arrangement appears difficult to reconcile with WTO law.
A Compromise That Weakens the Multilateral System
The paradox is even more striking. The European Union did not merely negotiate with the United States. It amended its own legal order to accommodate tariffs that were inconsistent with WTO law and that the US Supreme Court held to be unlawful. Rather than strengthening the legal position from which it had consistently defended the multilateral trading system, the EU weakened it. By rewarding unilateral tariff pressure with preferential market access, it conferred political legitimacy upon a tariff strategy that was legally defective in both legal orders.
Nor has this strategy achieved its stated objective. Regulation (EU) 2026/1455 itself anticipates the possible failure of the political compromise by empowering the European Commission to suspend the concessions if the United States departs from the Joint Statement. Subsequent developments have confirmed those concerns. The political agreement has not prevented the United States from threatening further tariffs. Most recently, President Trump warned that European countries introducing digital services taxes — measures formally applicable beyond US companies but perceived in Washington as targeting American digital platforms — would face new tariffs, notwithstanding the agreement itself. Judicial review has modified the legal basis of US tariffs. It has not modified their strategic purpose.
Churchill’s Lesson
The principal challenge to the multilateral trading system is therefore no longer limited to the adoption of unilateral tariffs. It also lies in the willingness of other trading powers to adapt their own legal orders in order to accommodate them. If preserving short-term stability requires departures from the core principles of WTO law, the long-term cost may exceed the immediate benefit.
Churchill's warning was never intended for international trade lawyers. Yet it captures an enduring lesson for international economic law. Appeasement may purchase temporary stability. It rarely removes the incentive to continue exercising pressure. As Churchill put it in 1938: "You were given the choice between war and dishonor. You chose dishonor, and you will have war."
