The highest officials in the European Union Executive Commission say they are pushing for a trade agreement with the Trump administration to avoid a 50% work on imported goods. Trump threatened to impose duties on 1 June, but moved the deadline to 9 July, repeating the frequently utilized tactics in his trade war. European negotiators face constantly changing and unpredictable threats of Trump's introduction of tariffs, but "although this must come up with something to calm them," said Bruce Stokes, a elder investigator at the German Marshall Fund of the United States.
Stokes besides sees more than just a misunderstanding about trade deficits. Trump's threats "are rooted in frustration with the EU, which has small to do with trade," said Stokes. "He does not like the EU. He does not like Germany.’ What precisely does Trump want? What can Europe offer? These are the key areas where both sides argue.
Buy our products
Trump complained many times about Europe selling more things to Americans than buying from them. The difference, or trade deficit in goods, was last year EUR 157 billion (178 billion). However, Europe argues that in terms of services — especially digital services specified as net advertising and cloud computing — the US sells more than they buy, which reduces the overall trade deficit to EUR 48 billion, which represents just about 3% of full trade. The European Commission claims that this means that trade is "sustainable".
One way to change trade in goods would be to buy more liquefied natural gas from the United States. To do so, the EU could cut off the remaining imports of Russian pipeline gas and LNG. The Commission is preparing rules to force the completion of these purchases — around 19% of imports last year — by the end of 2027.
This would force European private companies to look for another sources of gas, specified as the US. However, the departure from Russia has already begun and "of course it is not adequate to satisfy us," said Laurent Ruseckas, a natural gas marketplace expert at S&P Global Commodities Insights Research. The Commission does not buy gas itself, but it can usage "moral persuasion" to convince companies to turn to American suppliers in the coming years, but "it is not a wonderful solution and it does not produce immediate results," said Simone Tagliapietra, energy analyst at think tank Bruegel in Brussels.
Europe could buy more from US arms contractors as part of efforts to halt further aggression from Russia after the invasion of Ukraine, says Carsten Brzeski, global macro boss at ING bank. If European countries increase their overall defence spending — another Trump request — their voters will most likely insist that purchases go to arms contractors in Europe alternatively than in America, said Stokes of the German Marshall Fund. 1 way to overcome this political obstacle would be to build factories in Europe by American arms companies, but "it would take time," he said.
The EU could besides reduce its 10% taxation on abroad cars, 1 of Trump's long-term accusations towards Europe. "The United States will not be exporting as many cars to Europe... Germany would be the most resistant, but I don't think they're peculiarly afraid about the competition from America," said Edward Alden, a elder investigator at the Council on abroad Relations. "It would be a symbolic triumph for the President".
Beef over beef
The United States has long complained about European rules on food and agricultural products that do not let beef grown on hormones and chickens washed with chlorine. However, experts do not anticipate EU trade negotiators to offer any concessions at the negotiating table. “The EU does not want to capitulate,” said Mary Lovely, elder technological individual Peterson Institute for global Economics. "The EU has repeatedly said that it will not change its sanitary rules, its crop rules (genetically modified), its rules on chlorinated chickens, things that have long irritated the US". As she said, stepping down these issues would mean that "the United States will be able to set (standards) food safety standards for Europe".
Value added tax
One of the things that irritate Trump is the value added taxes applied by European governments. According to him, they are a burden for American companies. Economists say that this kind of tax, which is applied by around 170 countries, is neutral for trade due to the fact that it concerns both imports and exports. The value added tax, i.e. VAT, is paid by the final purchaser at the cash register, but differs from the sales taxation by being calculated at each phase of the production process. In both cases, VAT and sales, import and export taxes are treated the same way. The United States is an exception due to the fact that they do not apply VAT. There is small chance that countries will change their taxation systems due to Trump, and the EU has excluded this possibility.
Negotiation strategy
Trump's approach to the negotiations included threats of astronomical tariffs – up to 145% for China – before concluding a contract at importantly lower levels. Anyway, the White home took the position that it would not go below 10% of the base level. A 50% threat to the EU is so advanced that it means "effective trade embargo", said Brzeski, as it would impose costs that would make imports of goods unprofitable or would mean charging consumers with prices so advanced that goods would be uncompetitive.
Since the most complex issues between the EU and the USA — food safety standards, VAT, regulations on technology companies — are so hard that “it is impossible to imagine that they will be resolved by the deadline”, Alden said. ‘Perhaps what you can have — and Trump has shown that he is willing to do it — is simply a very tiny deal’, specified as the 1 he announced on 8 May with the United Kingdom .
Economists Oliver Rakau and Nicola Nobile of Oxford Economics wrote in a comment made on Monday that the introduction of 50 percent tariffs would consequence in a decrease in the overall economy of 20 countries with the euro currency, up to 1% next year, and besides reduce business investment by more than 6%. The EU has proposed to the US a zero-for-nothing solution in which duties would be abolished on both sides, on industrial goods, including cars. Trump rejected it, but EU officials said it was inactive on the table.
Lovely of the Peterson Institute believes threats and boasts are Trump's way of negotiating. "In the short term, I don't think 50% will be our reality." But he says Trump's strategy increases uncertainty around US politics that paralyzes business. "It suggests that the U.S. is an uncertain trading partner, that they act on whim alternatively than by the regulation of law," said Lovely. "Friend or enemy, you will not be treated well by this administration."
