TL/DR –
Donald Trump’s threat to impose 30% tariffs on the European Union (EU) has undermined the bloc’s confidence, which had secretly agreed to sacrifice trade for the wider aim of security and defence of the continent. The EU changed its initial negotiation stance, which had been to refuse to accept a limited trade deal in the style of the UK, and instead went for a similar arrangement hoping for relief from high taxes on car exports and import duties on steel. The pivot in negotiations was driven in part by security concerns around Russia, with the EU accepting it could take five to ten years to build up the necessary defence capabilities to respond to a military attack.
Trump’s Tariff Threats Jolt EU’s Confidence
Second-guessing Donald Trump is often unproductive, however, his latest surprise proposal to impose 30% tariffs on the EU has left the bloc shaken. Under negotiation pressure, EU diplomats admitted to ceding trade concessions to maintain security.
Up to mid-June, the EU wielded its economic power in the negotiations, with €1.4bn (£1.2bn) at stake for one of the US’s major trading partners. Despite openly criticising Keir Starmer’s UK deal, the EU recently changed its stance, pursuing a more basic deal in hopes of tariff relief.
One diplomat posed a critical question about the future of the international rules-based system if the EU fails to challenge Trump. There was even talk of levying taxes on tech giants like Google and Microsoft alongside traditional trade staples.
Last week, the EU proposed a pared-down deal similar to the UK’s, exchanging a 10% tariff for most imports for relief from steep taxes on car exports and steel imports. This was a significant shift reportedly triggered by concerns surrounding Russia and security. With the long-term threat of a military attack, the EU could take up to a decade to develop sufficient defence capacity.
Some diplomats commented on the EU’s submissive approach towards the US president, with one stating: “We got what we wanted – Trump is continuing to supply weapons for Ukraine.” Yet another diplomat noted the EU couldn’t emulate Japan’s tough negotiation stance as it doesn’t rely on the US for defence.
Discussing the negotiation switch, one Brussels diplomat stated: “This has been extremely tough. The negotiations impact the full spectrum of EU-US relations, including security and defence of Ukraine. There’s a balance between short-term pain and potential long-term damage.”
Although the EU had already conceded significantly in its deal hopes, Trump’s 30% tariff threat could provoke a trade war. Trade ministers are to meet in Brussels just before their own retaliatory tariffs against the US are set to resume, with calls from France and others for a return to a hardballing approach expected.
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