As the grace period for U.S. trade tariffs is about to end, last-minute negotiations are underway, but it seems unlikely that a comprehensive trade agreement will be reached with the European Union (EU), one of the world’s three major economic entities. This situation is unfolding amid escalating trade tensions between the EU and China over electric vehicle tariffs. The EU once considered the U.S. a partner in containing China but now feels isolated due to U.S. pressure.
According to the Washington Post (WP) on the 6th (local time), the EU is willing to accept a basic U.S. tariff of 10% but insists that high tariffs on specific items, such as pharmaceuticals, should be abolished. Meanwhile, the U.S. is demanding an exemption from the EU’s carbon tax on American steel producers.
It is reported that the EU plans to temporarily agree to the current tariffs, which include a basic tariff of 10%, a vehicle tariff of 25%, and a steel and aluminum tariff of 50%, while continuing negotiations. Germany, the biggest EU exporter, is eager to finalize a trade agreement with the U.S. swiftly, but France maintains a tough stance.
However, if negotiation details continue over the long term following a principled agreement, the situation might favor the EU. Unlike the U.S., which faces mid-term elections next year, European leaders have no major elections until 2029 and could employ delaying tactics.
In Europe, there is an awareness that the U.S.’s trade war is hampering strategies to contain China. Last April, during the U.S.-China tariff war, China restricted rare earth exports, threatening to halt operations at European auto plants. Additionally, as the U.S. imposed high tariffs on Chinese products, low-priced Chinese goods flooded into Europe, expanding the EU’s trade deficit with China to a record high this year.
Trade conflicts between the EU and China are becoming unprecedentedly intense. After the EU imposed a 45.3% tariff on Chinese electric vehicles last year, China retaliated with anti-dumping investigations on European brandy and pork. The EU then banned Chinese firms from medical device tenders, and China reciprocated with similar measures, continuing the cycle of retaliations. Their mutual trust has further deteriorated as China signaled it does not wish for Russia’s defeat amid the war between Europe’s biggest security concern, Russia and Ukraine.
In this context, rather than joining the EU in containing China, the U.S. is pressing the EU. President Trump publicly criticized the EU by claiming the union was essentially formed to deceive the U.S. regarding trade deficits. He has targeted EU tariffs on imported cars and internet regulations more harshly than China’s trade practices. Trump’s negotiation style, focused on displaying unilateral power, conflicts with the EU’s emphasis on multilateral agreements.
The New York Times (NYT) reported, “As the U.S. tries to shake up the existing trade order by aiming to reduce trade deficits, increase revenue, and reshore manufacturing, the EU finds itself isolated between the world’s largest economic powers.” It noted that although many expected closer economic ties between Europe and China following Trump’s election, that has not transpired.