How the EU is preparing to reach a tariff deal in Trump's game of chicken

CNBC

3 days ago

The U.S. has doubled down on its plan to impose 30% tariffs on the European Union next month, seeking to ramp up pressure on the bloc to reach a deal.
With less than two weeks to go until U.S. President Donald Trump's Aug. 1 deadline, the EU continues to negotiate with U.S. trade officials, while drawing up a series of possible countermeasures if a deal is not forthcoming.
For its part, the U.S. said the EU continues to be "very eager" in negotiating a trade agreement, according to White House press secretary Karoline Leavitt.
Speaking at a news conference on Thursday, Leavitt said the EU is exploring "ways to lower their tariff and their non-tariff barriers that we have long said harm our workers and our companies."
The U.S. president, whose trade war tactics have earned him the TACO nickname, will not accept a postponement of the Aug. 1 deadline, Leavitt said.
TACO stands for "Trump always chickens out" in reference to the president's tendency to date to announce high import tariffs, only to later delay or lower them.
Michal Baranowski, Polish undersecretary of state at the ministry of economic development and technology, said that, as work continues in a bid to reach a deal, the first part of the EU's strategy is to negotiate with U.S. officials in good faith.
"The second one is, let's prepare for countermeasures in case we don't [reach a deal]. And we have countermeasures on both the steel and aluminium tariffs as well as the initial package of 72 billion [euros] for so-called reciprocal tariffs," Baranowski told CNBC's "Europe Early Edition" on Friday.
"Point three, we are comparing notes with other countries that are affected by U.S. tariffs, not to necessarily coordinate but to get a sense of where everyone else is, because the other countries negotiating with the U.S. are a bit on the same wagon," he continued.
"Fourth, we are really strengthening European competitiveness."
Poland's Baranowski said the EU represents the "most vital economic relationship" for the U.S., adding that Washington has "as much to gain or to lose from this relationship as Europe."
His comments come shortly after the EU's top trade negotiator Maros Sefcovic traveled to Washington for further trade talks.
The prospect of fresh U.S. tariffs represents a major blow to the EU. The 27-nation bloc had been scrambling to secure a preliminary agreement to spare it from receiving a Trump letter dictating a new, across-the-board tariff on its exports to the U.S.
The U.S. and EU have the largest bilateral trade and investment relationship in the world, representing almost 30% of global trade in goods and services, and accounting for 43% of the global gross domestic product (GDP), according to EU figures.
Last year alone, the value of EU-U.S. trade amounted to 1.68 trillion euros ($1.96 trillion), equivalent to roughly 4.6 billion euros of trade per day.
Trump has repeatedly hit out at the EU for what he perceives to be an unfair trading relationship, often citing the EU's trade surplus with the U.S.
As part of its push to reach a U.S.-EU framework trade deal, the European bloc is said to be planning to offer the U.S. tit-for-tat tariff reductions on cars.
The move, as reported by the Financial Times on Thursday, would see the EU drop its 10% duties on U.S. car exports if the Trump administration reduces its own tariffs on the sector to below 20%.
The European Commission, the EU's executive arm, declined to comment on the report when contacted by CNBC on Friday.
The U.S. president imposed 25% tariffs on foreign-made vehicles and parts earlier in the year, hitting companies across Europe particularly hard.
Sweden's Volvo Cars, for instance, on Thursday reported a sharp decline in second-quarter operating profit, saying the result reflects an ongoing challenging environment for the industry. The automaker, which is seen as one of the most exposed European automakers to U.S. tariffs, was the first regional carmaker to release results in what is expected to be a bruising earnings season.