Former President Donald Trump announced plans to impose a 30% tariff on goods imported from the European Union (EU), effective August 1. This unforeseen jump, far above the expected 10% tariff rate, has European leaders and business people up in arms. The tariff is consistent with a proposed recent trade agreement between the United Kingdom and United States. This most recent development only complicates matters further for transatlantic relations.
The targeted announcement comes at a time of heightened negotiations between the U.S. and EU. As a businessman, Trump has suggested that he would be less inclined to impose new tariffs, since firms would just transfer increased import costs onto customers. Salomon Fiedler, a Berenberg economist, said that even with the increased tariff threats, “a lot of leeway for further negotiating” remains. He did these things, admittedly because that’s Trump’s style—lead with the outrageous and then get to the middle ground.
Fiedler’s insights reflect a broader sentiment within the economic community, as he stated, “The fact that Trump only threatened the new 30% rate for August 1, instead of implementing it more quickly, suggests he is still looking to negotiate.” This announcement is a ray of hope, indicating that there may still be some last minute diplomatic initiative to avert the tariff roll-out.
European officials have responded quickly and harshly to Trump’s announcement. Maros Sefcovic, deputy EU commission president, expressed his deep regret and disappointment over the timing of the tariffs. He added that this is especially alarming considering the stage of the current negotiations. He stated, “I cannot imagine walking away without genuine effort,” emphasizing the EU’s commitment to finding a resolution.
Analysts Carsten Brzeski and Inga Fechner observed that Trump’s letter to the EU serves as a tactic to intensify pressure in a negotiation. They cautioned that it not be viewed as a final ultimatum. Fechner remarked, “Trump’s letter to the EU is not a love letter but also not a hate letter.”
To combat the effects of the upcoming tariffs, the EU is preparing a number of measures to lessen the blow. And they are dramatically increasing their purchases of U.S. goods, primarily soybeans and military hardware. Simultaneously, they’re rolling back tariffs on US manufactured goods such as automobiles. At the same time, European leaders are looking to impose new export bans on critical products to the U.S., including pharmaceuticals.
With the August deadline creeping closer, European leaders are already starting to feel that pressure. They understand that they need to quickly cut a deal to stop the further escalation of these damaging, destructive trade tensions. Joerg Kraemer, an economist, expressed optimism about reaching a compromise: “I think both sides will strike a compromise. This is in the best interest of both the U.S. and the European Union.” At the time, he estimated an average tariff rate of about 15% on EU exports to the U.S.
Yet the complex politics surrounding international trade negotiations guarantee that time is short. European authorities are under extreme time and political pressure to develop a strategy. They now have 26 days to save their economic bacon, and to comply with U.S. demands before the new tariff is implemented.
As talks drag on, most observers don’t think they’ll succeed in forging a complete trade pact. Fiedler noted that “the always remote hope of a good negotiation outcome — the bilateral removal of all tariffs and some other trade barriers between the EU and the U.S. — has all but disappeared from view by now.”