EU-US Trade Tensions: A Delicate Dance of Threats and Negotiations

Strategic Insights -

The ongoing trade dispute between the European Union and the United States is reaching a critical point, with a 30% tariff on most EU goods set to take effect on August 1. European Commission President Ursula von der Leyen will meet with President Trump in Scotland to discuss the issue, amidst ongoing negotiations. Cecilia Malmstrom, former European Commissioner for Trade, provides insight into the EU's stance and the potential consequences of a deal or no deal.

Key Takeaways:

  • The EU-US trading partnership is one of the most important in the world, with over $4 billion in daily trade and 16-17 million jobs on both sides.
  • The EU is seeking to deepen and facilitate trade with the US, but is facing significant challenges due to the threat of tariffs.
  • The EU has offered to remove all tariffs on US goods on a reciprocal basis, but the US has not accepted this offer.
  • Cecilia Malmstrom notes that the EU is trying to de-risk from the US by increasing trade relationships with other countries, including China, Indonesia, and India.
  • Malmstrom believes that China may not fill the void left by the US in the global trading order due to complex and contentious relationships between the two countries.
  • The EU is not taking President Trump's social media declarations and announcements seriously, but is trying to be cautious and prepared for any possible outcome.
  • The European Union has agreed on a list of possible retaliation measures in case a deal is not reached.

Statistics:

  • $4 billion: the daily trade between the EU and the US.
  • 16-17 million: the number of jobs on both sides that depend on the EU-US trading partnership.
  • 82%: the percentage of the EU's trade that is not with the US.
  • 50%: the tariff rate on steel and aluminum imports from the EU.
  • 25%: the tariff rate on car and car parts imports from the EU.
  • 30%: the tariff rate on most EU goods set to take effect on August 1.

Sources:

  • Malmstrom, Cecilia (former European Commissioner for Trade)
  • Peterson Institute for International Economics (nonresident senior fellow)