President Trump’s threats to hit the European Union with fresh tariffs of up to 50 per cent in June show that the American leader is still “escalating to de-escalate” in his trade wars.
Trump’s attack on the continent — a bloc that has long been in his crosshairs over its near €200 billion trade surplus with the US — had become more, not less, likely after the White House made partial trade deals with the UK and China in May.
Negotiating with the EU was always going to be a far trickier endeavour when the White House has identified the continent’s long list of “non-tariff” barriers, such as regulations and tech taxes as an impediment to talks. US-EU talks were always unlikely to be resolved by lowering tariffs on goods or getting Europeans to buy more American cars or gas as China and the UK have promised.
Sir Keir Starmer signed a trade deal with Trump in May
JIM WATSON/AFP/GETTY IMAGES
Trump’s assault on the EU’s 27 economies will not directly affect the UK and will make the prime minister’s early trade deal even more of a triumph for the government. After the agreement, the effective US tariff rate on all UK imports will be about 9 per cent, with a zero tariff rate on British steel and aluminium. If Trump presses ahead with a blanket 50 per cent levy on the EU from June 1, it will make the UK the only big European economy to escape the worst of US protectionism.
Punitive tariffs of 50 per cent would have a devastating impact on German carmakers, Ireland’s pharmaceutical sector and the array of chemicals and machinery firms across Europe that sell to the US market.
Higher tariffs on the EU will affect the German car industry
FILIP SINGER/EPA
The threat, made on Friday afternoon, has spooked financial markets, which had been enjoying a brief respite. Brussels negotiators will be banking on the market reaction worsening into next week and forcing the president into another climbdown. At best, it may buy time for the EU27 to agree on a joint strategy on how to de-escalate.
“The EU does not do trade deals in a few hours — this is simply not the way the bloc works,” Agathe Demarais, senior policy fellow at the European Council on Foreign Relations, said.