Trade accord between US and China escalates EU unease
The EU's stance on the US-China trade deal is a glass half-full situation, according to the European Commission. They view any positive trade news as a good thing for the global economy. However, the agreement between the US and China puts the EU in a predicament as the ongoing technical negotiations aren't progressing well.
With the July 9 deadline looming, the Commission is readying for an extension in the negotiations, should there be no agreement. The US imports tariffs are on a rise, with the Trump administration's tariffs reaching 50% compared to the current 10%, and the EU is in a vulnerable position. They can only impose tariffs on $21 billion worth of goods, which were approved in response to the previous 25% tariffs on steel and aluminum and then frozen.
There have been numerous requests for changes to the second list of American goods proposed by the Commission, worth around $95 billion. These "list of grievances" aren't boosting Commissioner Maros Sefcovic's negotiating power. Ireland has expressed the strongest criticism of the retaliation measures, urging the Commission to reconsider American goods in the list, particularly aircraft, medical devices, and even thoroughbred horses and animal feed.
Even the Italian government is advocating for a soft approach. Minister of Economy and Finance, Giancarlo Giorgetti, acknowledged that tariffs have intensified an already uncertain international scenario. However, he represented the hope of the Italian government to reach a zero-for-zero tariff agreement. A compromise would be much preferable to the current situation of frequent, often contradictory, US announcements that destabilize economic operators.
The EU continues to face an uncertain future in its trade dealings with the US, as negotiations at the upcoming G7 summit may impact the transatlantic trade relationship. Ursula von der Leyen will meet Trump at the summit, though no bilateral meetings have been scheduled yet due to Trump's unpredictability.
Insights:
In the broader context, the EU's response to the US-China trade deal is part of a larger strategy to maintain open, rules-based trade while defending its own economic interests. The EU is prepared to act decisively if its own negotiations with the US prove unsuccessful, as shown by its recent public consultation on potential countermeasures to US tariffs on automotive, aluminum, and other goods, which could affect €95 billion in US exports to the EU if implemented.
The EU's approach reflects its intent to use leverage in trade negotiations and protect its industries from external tariff pressures. The US-China trade deal indirectly puts pressure on the EU to clarify its own negotiating stance with both superpowers. Should these consultations lead to new tariffs, they could spark retaliatory measures and further complicate efforts to reach a comprehensive trade agreement.
Tariffs and trade negotiations remain central tools in EU-US relations, with both sides using them as leverage. The EU’s ability to respond quickly and proportionally to US regulatory changes, such as the modification of tariff procedures and the expansion of Section 232 tariffs on aluminum and steel derivatives, is critical to maintaining a balance of power in the transatlantic trade relationship.
The Commission's readiness for an extension in negotiations indicates the EU's average willingness to stall the US-China trade deal, given the potential negative impact on the EU's economy. The ongoing policy-and-legislation developments, such as the EU's reconsideration of American goods in the retaliation list, are clear indications of the EU's involvement in politics and general news.
