After Nato deal, how far will EU go for trade peace with Trump?
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The European Union has until July 9 to reach a deal or see swingeing tariffs kick in on a majority of goods.
PHOTO: AFP
BRUSSELS - After satisfying Mr Donald Trump’s calls for Europe to ramp up defence spending
Time is running out. The EU has until July 9 to reach a deal or see swingeing tariffs kick in on a majority of goods, unleashing economic pain.
The European Commission, in charge of EU trade policy, has been in talks with Washington for weeks, and the leaders of Europe’s two biggest economies France and Germany on June 26 urged Brussels to move fast in search of a deal.
“France is in favour of reaching a quick agreement, we don’t want it to drag on forever,” French President Emmanuel Macron told reporters after summit talks involving the bloc’s 27 leaders and EU chief Ursula von der Leyen.
While Mr Macron said European nations “do not want a deal at any cost”, Germany’s chancellor has signalled he wants to close a deal fast – even if it means an unbalanced outcome with some level of US tariffs on EU goods.
“It’s better to act quickly and simply than slowly and in a highly complicated way,” Mr Friedrich Merz told a press conference after the talks.
The EU has put a 0 per cent tariff proposal on the table – but it’s widely seen as a non-starter in talks with Washington.
Dr von der Leyen said the commission had just received the latest US counterproposal, adding: “We are assessing it as we write, speak right now.”
‘Swiss cheese’ approach
According to several diplomats, the goal at this point is rather to let Mr Trump claim victory without agreeing a deal that would significantly hurt Europe.
One diplomat suggested leaders would be happy with a “Swiss cheese” agreement – with a general US levy on European imports, but enough loopholes to shield key sectors such as steel, automobiles, pharmaceuticals and aeronautics.
This would be less painful than the status quo, with European companies currently facing 25 per cent tariffs on steel, aluminium and auto goods exported to the US, and 10 per cent on a majority of EU products.
Mr Merz had earlier this week taken aim at the EU’s approach to talks as overly complicated, urging “rapid, joint decisions for four or five major industries now”.
The issue was the focus of the summit dinner on June 26, at which Dr von der Leyen was able to test leaders’ red lines in negotiations.
If no agreement is reached, the default tariff on EU imports is expected to double to 20 per cent or even higher – Mr Trump having at one point threatened 50 per cent.
White House press secretary Karoline Leavitt on June 26 suggested the administration could extend the July deadline, but said “that’s a decision for the President to make”.
Keeping calm
Unlike Canada or China, which hit back swiftly at Mr Trump’s tariff hikes, the EU has consistently sought to negotiate with the US leader – threatening retaliation only if no agreement is reached.
“We will not allow ourselves to be provoked, we will remain calm,” said Belgian Prime Minister Bart De Wever, urging the EU to avert an all-out trade war with Washington.
Talks between EU and US negotiators have intensified in recent weeks.
Mr Trump divides the Europeans.
Hungarian Prime Minister Viktor Orban and Italian Prime Minister Giorgia Meloni are both vocally supportive of Mr Trump – while others are more wary.
“The problem is that on behalf of the United States, we have a heavyweight dealmaker – on our side, EU, has light capacity and capability leaders to negotiate,” said Mr Orban.
Pro-trade countries in Europe’s north are especially keen to avoid an escalation.
The EU has threatened to slap tariffs on US goods worth around €100 billion (S$149 billion), including cars and planes, if talks fail to yield an agreement – but has not made any mention of those threats since May.
The US is also using the negotiations to try to extract concessions on EU rules – particularly digital competition, content and artificial intelligence regulations, which Washington claims unfairly target American champions such as Apple, Google, and Meta.
Europeans are ready to discuss common transatlantic standards, but the EU’s digital rules are a red line for Brussels. AFP
