Trump's recent strategy in phone discussions concerning tariffs could potentially intensify the EU's countermeasures threat.
Uncertainty Looms as Trump Threatens Tariffs on European Union
President Trump's announcement of potential 50% tariffs on the European Union (EU) signals a return to major trade uncertainties and has a high likelihood of prompting retaliation from the EU. The unexpected declaration, issued just hours before negotiations with European trade representatives, can be interpreted as a display of presidential assertiveness.
This escalation in trade tensions raises the risk of retaliatory measures from Europe, potentially putting global trade and financial markets in turmoil after a brief period of relative calm. Previous rounds of negotiations between the US and China, as seen in talks in Switzerland two weeks ago, had eased Sino-American hostilities and minimized the impact of three-digit tariffs.
Financial markets had regained most of the losses caused by Trump's initial announcement of a total trade war on 'Liberation Day' in April, when optimism about the possibility of meaningful compromise emerged. Even the UK had managed to secure a deal of sorts, with auto tariffs dropped in exchange for opening up agricultural markets.
However, there will be no such deal for the EU in the immediate future. A 50% tariff on all exports to the US is not only higher than the originally proposed blanket tariff of 20%, but it also surpasses China's tariffs. The European stock market ended the week on a downward trend, with car manufacturers like BMW, Volkswagen, and Stellantis among the biggest losers.
Whether this threatened tariff will ultimately materialize remains to be seen. Trump has a history of backing down in trade disputes, as seen in the global reciprocal tariffs he retreated from following pushback from bond markets and an accommodation with China in Geneva. However, his grievances with Europe seem more pronounced, and the repercussions of the resulting uncertainty could be far-reaching.
Read more: Trump's Trade Argument against UK Lacks Substance Why Trump Folded in US-China Trade War
The escalation in Trump's trade politics, with threats of a 50% tariff on the EU, could lead to a general news headline about an escalation in war-like trade negotiations. This high tariff, surpassing China's, may prompt escalated retaliation and put global markets and trade in turmoil once again.
