Introduction to US-EU Tariff Dispute
July 9th is almost just around the corner. At this moment, 50% tariffs could occur in EU goods that are sold to the USA if the two sides do not complete a deal in advance. US President Donald Trump scored on April 2 with a basic tariff of 10% EU goods and a rate of 25% for imported cars and 50% for steel and aluminum. By April 9th, he threatened the interest rate of 10% to 50%, but a share market sales triggered by its tariffs led to a shift.
Background of the Dispute
In the meantime, the EU and the US negotiators have reached an agreement before the impending deadline, since in the European capitals of the EU Trade Commissioner Maros Sefcovic will be able to conclude a deal that meets the Member States. The President of the European Commission, Ursula von der Leyen, announced on Thursday (June 3) of a press conference that it was "impossible" to delete a comprehensive trade agreement in 90 days, but it was hopeful to hope "an agreement" in principle that referred to the agreement that the USA and the United Kingdom had met for the goal.
Department in EU Capitals
Those who observe the negotiations tell you that there have been sharp divisions in the Member States of the European Union, which concessions are acceptable and what the US team should offer. For example, German Chancellor Friedrich Merz spoke of the need to quickly complete a deal and criticize the "complicated" approach of the European Commission. "What is at stake here is the quick solution to a customs dispute, especially for the key industries in our country," he said. However, French President Emmanuel Macron condemned the idea that the tariffs are raised by powerful countries as "extortion" without referring to Trump.
Possible Agreement
Jacob Funk Kirkegaard from the Peterson Institute for International Economics in Washington DC does not believe that the position of the German Chancellor will be "acceptable" for all EU members. While the comments from Sefcovic and the Leyen were somewhat conciliatory towards Trump and the USA, Kirkegaard sees this as an attempt to maintain the unit among the Member States. If the British deal is a model, the EU probably has to live with 10% tariffs that are available in many goods, as Great Britain did. The US AK agreement reduced the tariff for British cars in Great Britain to 10%, but the number of cars that can be imported with this task is the amount of cars to the USA in 2024 to 100,000 limited.
Give Trump the Victory
Bill Reinsch, a high-ranking economic advisor at the Washington-based Center for Strategic and International Studies (CSIS), is of the opinion that an Agreement in the British style is the most likely result. However, what is most important for Trump is the perception he "won" than what was actually agreed, Reinsch told. "What is important to him is the Oval Office meeting, which has been agreed and so agreed, and now everything will be fine. So it would not surprise me if there is a" quote, a unconstitution "with the EU." He argues that it would be advisable for the EU to focus more on political results than on the perception of the gained.
Digital Sales Tax
An area in which there are many speculations about possible EU accesses, outside the tariffs, are in the digital guideline, in particular the law on digital services and possible digital sales taxes. Germany has considered a tax of 10% for the sales of US-Digital giants like Google and Metas Facebook in Europe. Trump spoke out against such plans and this week Canada has a digital sales tax proposal to keep the trade talks with the USA alive. Reinsch believes that the EU should prevent the Member States to introduce them to taxes because "Trump is right in his position," he argued, and that was "not even rhetoric".
No Deal?
If the deadline emerges on July 9, the effects of negotiations in the inflow of serious consideration are given. The EU has described the transatlantic trade relationship as "the most important commercial relationship in the world", since bilateral trade in goods and services in 2023 achieved € 1.6 trillion ($ 1.88 trillion), according to the EU Commission’s data. According to Kirkegaard, a scenario without a deal in some EU countries could be necessary for the fiscal stimulus due to the "short-term volatility". But the EU can handle it, he believes. "We wouldn’t be back [financial crisis of] 2008 or a situation that is similar to the energy price shock that happened after the Russian invasion in 2022 – absolutely not, "he said.
