David Mchugh and Paul Wiseman, AP Business Writer
Frankfurt, Germany (AP) — The top official of the European Union Executive Committee says it is pushing hard for a trade contract with the Trump administration to avoid a 50% tariff on imports. Trump had threatened to impose tariffs on June 1, but pushed back the deadline until July 9, repeating the tactics commonly used in trade wars.
European negotiators are fighting Trump’s constant, unpredictable tariff threat, but “still, they have to come up with something to appease him,” Bruce Stokes said.
Stokes also sees more than mere differences of opinion about the trade deficit. Trump’s threat is “rooted in frustration about the EU, which has little to do with trade,” Stokes said. “He doesn’t like the EU. He doesn’t like Germany.”
What exactly does Trump want? What can Europe offer? Here is an important area where both sides are squared.
Buy ours
Trump has lamented many times the fact that Europe sells more to Americans than they buy from Americans. The difference last year, or the trade deficit for goods, was 157 billion euros ($178 billion). However, Europe sells more than its purchases when it comes to services, particularly digital services such as online advertising and cloud computing, reducing the overall trade deficit to 48 billion euros. This represents only about 3% of total trade. The European Commission says that means trade is “balanced.”
One way to shift trade in goods is to shut down the remaining imports of Russian pipeline gas and LNG in order to do so, in order for Europe to purchase more liquefied natural gas from ships from the US. The committee is preparing legislation to force the purchase of about 19% of imports last year by the end of 2027.
Laurent Ruseckas, a natural gas market expert at S&P Global Commodities Insights Research, said that while it encourages European private companies to look for other gas sources like the US, the shift from Russia is already moving and “clearly not enough to be satisfied.”
The committee won’t buy the gas itself, but can use “moral litigation” to persuade businesses to resort to US suppliers in the coming years, but “this is not a silver bullet and it cannot have immediate results,” said Simone Taliapietra, an energy analyst at the Brussels think tank.
Carsten Brzeski, global chief of ING Bank Macro, can buy more from US defense contractors as part of an effort to stop further attacks from Russia following the Ukrainian invasion. Stokes of the German Marshall Fund is likely to argue that if European countries increase overall defence spending, another of Trump’s demands would likely insist on purchasing from European defense contractors rather than the US. One way to avoid that political hindrance is for US defense companies to build factories in Europe, but “it takes time,” he said.
The EU could also cut a 10% tax on foreign cars, one of Trump’s long-standing complaints about Europe. “Anyway, the US is not going to export many cars to Europe… The Germans are the most resistant, but I don’t think they’re very concerned about competition with the US.” “It’s going to be a symbolic victory for the president.”
Beef on beef
The US has long been appealing for European regulations on food and agricultural products that do not eliminate beef and chickens grown with chlorine sterilized hormones. However, experts do not expect EU trade negotiators to offer concessions at the negotiation table.
“The EU doesn’t want to surrender,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. “The EU has repeatedly stated that it will not change hygiene rules, (genetically modified) crop rules, chlorinated chicken rules, and long-standing US stimulants rules.”
Supporting these issues, she said, “The United States can set European food safety (standards).
VAT
One of Trump’s pet peeves is a value-added tax used by the European government, and he says that what he calls taxes is a burden on US businesses.
Economists say this type of tax, which is used in around 170 countries, is trade-neutral as it applies equally to imports and exports. VAT, or VAT, is paid by the final buyer at the register, but is different from sales tax in that it is calculated at each stage of the production process. In both cases, VAT and sales tax, import and export will receive the same treatment. The US is an outlier in that it does not use VAT.
There is little chance that the country will change its tax system for Trump, and the EU has ruled it out.
Negotiation Strategy
Trump’s approach to negotiations includes astronomical fee threats of up to 145% in China before trading at a much lower level. However, in any case, the White House has taken the stance not below the 10% baseline. The 50% threat in the EU is so high that it means “effective trade embargo.” Because Brzeski imposes costs that mean importing goods or charging consumer prices, making the goods uncompetitive.
The most connected issues of splitting the EU and the US (food safety standards, VAT, regulations for high-tech companies) are so difficult, “it’s impossible to imagine them being resolved by the deadline,” says Alden. “What you can probably have — and that Trump showed he’s willing to do this, it’s like he announced in the UK on May 8th.”
Oxford Economics economists Oliver Lacau and Nicola Novill wrote in commentary on Monday that a 50% tariff will use the euro currency at up to 1% next year, reducing the collective economies of 20 countries, which cut business investments by more than 6%.
The EU provided the US with a “zero of zero” result. This result removes tariffs on industrial products on both sides, including cars. Trump has rejected it, but EU officials say it is still on the table.
Peterson Institute’s Lovely sees threats and intense things as a way of negotiating Trump. “In the short term, I don’t think 50% will become our reality.”
But she says Trump’s strategy adds to the uncertainty about US policies that are paralyzing businesses. “It suggests that the United States is an unreliable trading partner and operates on a whim, not on the rule of law,” Lovely said. “Friends and enemies, you will not be treated well by this administration.”
Wiseman contributed to this report from Washington.
Original issue: May 27, 2025, 3:09pm EDT
