Donald Trump announced on Saturday that goods imported from both the European Union and Mexico will face a 30% US tariff rate starting 1 August, in letters posted to his social media platform, Truth Social.
The tariff assault on the EU came as a shock to European capitals as the European Commission and the US trade representative Jamieson Greer had spent months hammering out a deal they believed was acceptable to both sides.
The agreement in principle put on Trump’s table last Wednesday involved a 10% tariff, five times the pre-Trump tariff, which the bloc already described as “pain”.
EU trade ministers will meet on Monday for a pre-arranged summit and will be under pressure from some countries to show a tough reaction by implementing €21bn ($24.6bn) retaliatory measures which they had paused until midnight the same day.
In his letter to Mexico’s leader, Trump acknowledged that the country has been helpful in stemming the flow of undocumented migrants and fentanyl into the United States.
But he said the country has not done enough to stop North America from turning into a “Narco-Trafficking Playground”.
“We have had years to discuss our Trading Relationship with The European Union, and we have concluded we must move away from these long-term, large, and persistent, Trade Deficits, engendered by your Tariff, and Non-Tariff, Policies, and Trade Barriers,” Trump wrote in the letter to the EU. “Our relationship has been, unfortunately, far from Reciprocal.”
The higher-than-expected rate has dealt a blow to the EU’s hopes of deescalation and a trade deal and could risk a trade war with goods of low margins including Belgian chocolate, Irish butter and Italian olive oil.
The EU was informed of the tariff hike ahead of Trump’s declaration on social media.
The European Commission president, Ursula von der Leyen, said the 30% rate would “disrupt transatlantic supply chains, to the detriment of businesses, consumers and patients on both sides of the Atlantic”.
She said the bloc was one of the more open trading places in the world, and still hoped to persuade Trump to climb down.
“We remain ready to continue working towards an agreement by August 1. At the same time, we will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required,” she said.
Italy’s prime minister, Giorgia Meloni, called for “goodwill … to reach a fair agreement that can strengthen the west as a whole. It would make no sense to trigger a trade war between the two sides of the Atlantic.” She added that both sides should avoid “polarisation”.
The decision to hike the tariffs will also be another test of Trump’s ability to act in good faith in negotiations.
Brussels will view the latest threat as a maneuver by Trump to extract more concessions from the EU, which he once described as “nastier” than China when it came to trade.
While Trump indicated earlier this week that his new rates, also levelled against big economies including Japan, South Korea and Brazil, will not apply until 1 August, his latest tactic will create much distrust.
Brazil’s president, Luiz Inácio Lula da Silva, downplayed the impact of the threatened 50% tariff. Trump and Lula have indicated a willingness to negotiate, though Lula also said: “Trump could’ve called, but instead posted the tariff news on his website – a complete lack of respect which is typical of his behavior towards everyone.”
Even if Trump had agreed to the proposal put on his table on Wednesday, further negotiations would have been needed in any case to create a legal text that can be formally registered by the US government, a process that is itself laden with risk.
The UK took seven weeks to get its agreement registered with a promise included to reduce tariffs on car exports from 27.5% to 10%, but the agreed zero tariff for the British steel industry was omitted.
Douglas Holtz-Eakin, a former Congressional Budget Office director and president of the center-right American Action Forum, said the letters were evidence that serious trade talks were not taking place over the past three months. He stressed that nations were instead talking among themselves about how to minimize their own exposure to the US economy and Trump.
“They’re spending time talking to each other about what the future is going to look like, and we’re left out,” Holtz-Eakin said.
He added that Trump was using the letters to demand attention, but, “in the end, these are letters to other countries about taxes he’s going to levy on his citizens”.
The new tariff ends a turbulent week for the EU with Trump announcing an extension for talks until 1 August on Monday, then on Tuesday announcing the EU would “probably” receive a letter setting its new US tariff rate within 48 hours, claiming the bloc had shifted from being “very tough” to “very nice”.
But diplomats viewed it as a mixed message as Trump stressed that he was still talking to negotiators from the bloc, but that he was displeased with European policies toward US tech firms.
Credit: The Guardian
