EU Firms Up Trade Strategy Ahead Of Trump’s Tariff Deadline

European Union leaders are set to debate their strategy in response to President Donald Trump’s trade war, with the likely choices coming down to accepting an unbalanced deal or risking escalation by striking back.

European Commission President Ursula von der Leyen will brief EU leaders on the status of negotiations with the US over dinner Thursday as several capitals push the commission, which handles trade matters for the bloc, to go for a quick deal with the US even if it means that many of Trump’s tariffs stay in place, according to people familiar with the matter.

The EU needs to reach an agreement with Trump by July 9, when tariffs on nearly all of the bloc’s exports to the US increase to 50%. The US president says the EU takes advantage of US with its goods surplus and perceived barriers to American trade.

“We hope that the discussions with the US continue in an energetic mood in the coming days — the July deadline is coming soon,” Luxembourg Prime Minister Luc Frieden told reporters on his way into the summit. “I wish the commission good luck.”

Negotiations have intensified in recent weeks and detailed discussions are taking place on both tariffs and non-tariff barriers, as well as on key sectors, strategic purchases and regulatory matters the EU is hoping to address through its simplification agenda, said the people, who spoke on the condition of anonymity.

The US is asking the EU to make what the bloc’s officials see as unbalanced and unilateral concessions, Bloomberg reported earlier. Discussions on critical sectors — such as steel and aluminum, automobiles, pharmaceuticals, semiconductors and civilian aircraft — have been particularly difficult.

Officials believe the best-case scenario remains an agreement on principles that would allow the negotiations to continue beyond an early July deadline.

Alongside a 10% universal levy on most goods — which is currently facing a US court challenge — Trump has introduced 25% tariffs on cars and double that on steel and aluminum based on a different executive authority. He’s also working to expand tariffs on other sectors, including pharmaceuticals, semiconductors and commercial aircraft.

Many of those duties are expected to stay, regardless of an agreement with the Trump administration, according to the people. The EU, which has been seeking a mutually beneficial deal, will assess any end-result and at that stage decide what level of asymmetry — if any — it’s willing to accept.

The EU’s industry chief, Stephane Sejourne, told Bloomberg this week that the EU would need to respond to any tariffs — including a baseline 10% levy — with countermeasures. But some EU leaders, including Italy’s Giorgia Meloni have indicated that they could live with some levies if it allows for a rapid deal that avoids an escalation in the conflict.

“When we discussed 10% with companies, it isn’t particularly impactful for us,” Meloni told reporters in The Hague Wednesday after the NATO summit. “I think a decision at 10% would enable us, as far as we’re concerned, to keep working on things that we care about.”

In parallel to ongoing talks with the Trump administration, the EU continues to prepare counter-measures should negotiations fail to yield a satisfactory result, or if the bloc opts to move ahead with measures to correct any imbalances.

“My recommendation is that we continue doing everything we can to influence the Americans not to engage in a trade war,” Danish Prime Minister Mette Frederiksen said Thursday. “If the Americans maintain this stance, then of course we’ll have to respond in kind.”

The EU has approved tariffs on €21 billion ($24.6 billion) of US goods that can be quickly implemented in response to Trump’s metals levies. They target politically sensitive American states and include products such as soybeans from Louisiana, home to House Speaker Mike Johnson, as well as agricultural products, poultry, and motorcycles.

The bloc has also prepared an additional list of tariffs on €95 billion of American products in response to Trump’s so-called reciprocal levies and automotive duties. They would target industrial goods including Boeing Co. aircraft, US-made cars, and bourbon. The EU is also consulting member states to identify strategic areas where the US relies on the bloc, as well as potential measures that go beyond tariffs.

One concern among officials is that any lopsided arrangement could see European companies shift investments and production to the US, one the people said.

“Every effort has to be made to get a landing zone that we can live with,” Irish Prime Minister Micheal Martin said. “If a tariff dispute ensues, no body wins, there is no painless tariff war.”

Source: Bloomberg Europe