U.S. Allies Grope for Response to Trump's Tariff Squeeze

Hindustan Times

2 days ago

BRUSSELS—America's biggest trading partners have tried tactics ranging from appeasement to retaliation to avoid higher tariffs. Most have come away bruised and empty-handed.
Mexico took Trump's drug-enforcement demands seriously and boosted security measures. The European Union paused retaliation plans to focus on trade talks. Canada hit back with tariffs several months ago before shifting to a more conciliatory approach.
All are faced with tariffs that have risen sharply since President Trump took office. This past week he threatened most of them with further escalation.
Now they are grappling with how to respond to a U.S. administration that is using trade policy for a range of political and economic objectives. Over the past week, Trump sent letters containing fresh tariff threats to about two dozen countries.
Some, including Japan and the EU, had sought to address his concerns in recent months, said Simon Evenett, a professor at IMD Business School who runs Global Trade Alert, a trade-policy monitoring site. But he said it's unclear whether engagement has resulted in better treatment.
'They found out that it's not a negotiation—it's a take-it-or-leave-it situation,' he said.
Most countries will probably still try to negotiate a deal ahead of Aug. 1, Evenett said. But they should also start thinking about how to adapt to Trump's tariffs by supporting their exporters and helping companies find new markets, he said.
European Commission President Ursula von der Leyen said Sunday that the bloc would keep on hold its retaliatory tariffs until early August while it negotiates with the U.S. She added that the EU is also continuing to ready further countermeasures, 'so we are fully prepared.'
French President Emmanuel Macron says the European Union should speed up the preparation of countermeasures in case a trade deal with the U.S. isn't reached.
Ambassadors from the EU's member states were due to meet Sunday to discuss Trump's letter, which threatened to increase blanket tariffs on most European goods to 30% from the current 10% level. European officials had believed until recently that progress in their talks with the U.S. meant they wouldn't be among the trading partners receiving a letter last week.
The results could change before Aug. 1. Some analysts viewed Trump's letters as a negotiating tactic that aims to put more pressure on governments before next month's deadline.
Dan Mullaney, a former assistant U.S. trade representative for Europe and the Middle East, said he thinks Trump's letter to the EU is about pushing the bloc toward a better deal. Trump previously threatened imminent 50% tariffs on the EU in May, in a move that appeared to speed up negotiations.
Still, Mullaney said the letter is likely to embolden those in the EU who want to retaliate and have argued that the U.S. isn't serious about doing a deal. 'Those people will feel like they're now justified in their beliefs,' he said.
French President Emmanuel Macron said Saturday that the EU should speed up preparation of its countermeasures in case a deal isn't reached, 'by mobilizing all the instruments at its disposal.' He said that includes the EU's so-called anticoercion instrument, a legal tool that could allow the bloc to impose levies on U.S. services, among other measures.
Von der Leyen said Sunday that the anticoercion instrument exists for extraordinary situations. 'We are not there yet,' she said. 'This is now the time for negotiations.'
She made the comments on Sunday while announcing a political agreement on a trade deal with Indonesia, which she said shows how the EU is looking for new markets.
Just two countries have secured outline trade deals with the Trump administration: the U.K. and Vietnam. China and the U.S. reached a tariff truce after a tit-for-tat escalation earlier this year.
The range of U.S. trading partners that are now facing new tariff threats from the U.S. shows how difficult it is to draw conclusions from the different approaches countries took in responding to the Trump administration, said Dmitry Grozoubinski, senior trade adviser at Aurora Macro Strategies.
Mexico and Canada had a pre-existing trade relationship with the U.S. that was based on the U.S.-Mexico-Canada Agreement, a deal that Trump himself had pushed for during his first term as president, Grozoubinski said. And both countries boosted border security in response to Trump's demands.
The EU appeared to be negotiating constructively. And Brazil, which Trump threatened to put 50% tariffs on this week based on grievances not related to trade, imports more American goods than it exports to the U.S., resulting in a trade surplus for the U.S.
'I legitimately do not know what you could possibly advise someone in terms of best negotiating approach, when it is very, very clear that what constitutes an acceptable landing zone is entirely within one person's mind and constantly shifts,' Grozoubinski said.
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