EU Awaits Trump Letter as Markets Digest Latest Tariff Salvo

MTV Lebanon

6 days ago

The European Union braced on Friday to receive a letter from U.S. President Donald Trump, outlining planned duties on his largest trade and investment partner after a broadening of his tariff war in recent days.
The EU initially hoped to strike a comprehensive trade agreement, including zero-for-zero tariffs on industrial goods, but months of difficult talks have led to the realisation it will probably have to settle for an interim agreement and hope something better can still be negotiated.
The 27-country bloc is under conflicting pressures as powerhouse Germany urged a quick deal to safeguard its industry, while other EU members such as France have said EU negotiators should not cave into a one-sided deal on U.S. terms.
After keeping much of the world guessing on his intentions, Trump has outlined new tariffs for a number of countries, including allies Japan and South Korea, along with a 50% tariff on copper, and a hike to 35% on Canada.
"We would need a crystal ball to detect what the U.S. intentions are," an EU diplomat said on condition of anonymity.
Another source with knowledge of the U.S.-EU negotiations said an agreement was close, but that it was hard to predict if the EU might still get a letter announcing more tariffs or when any agreement might be finalised.
One European industry lobbyist said it was nearly impossible to anticipate Trump's thinking. 'It's policy by Truth Social,' the lobbyist said, referring to Trump's social media platform.
European shares dipped on Friday as investors awaited word on tariffs for the EU.
"The EU has been negotiating with the U.S. about the sector tariffs and also about the reciprocal tariffs...everybody was expecting that there would be a better trade deal coming, but now it looks like it will be a worse outcome," said Jochen Stanzl, chief market analyst at CMC Markets.
Stanzl added a rally on Germany's DAX reflected hopes of a better trade deal with the United States, but that the tariffs on Canada, despite weeks of talks, had cast some doubt on whether it could be achieved.
Elsewhere U.S. Secretary of State Marco Rubio met with Chinese Foreign Minister Wang Yi in Kuala Lumpur on Friday, as the two powers vied to push their agendas in Asia as tension simmers over Trump's tariffs.
Rubio said the meeting was "very constructive," while adding the two sides had issues to resolve.
China this week warned the United States against reinstating hefty levies on its goods next month and Beijing has also threatened to retaliate against nations that strike deals with the United States to cut China out of supply chains.
Trump has periodically railed against the EU, saying in February that it was "formed to screw the United States" and asking why Europe exports so many cars but buys so few from the U.S. in return.
His biggest grievance is the U.S. merchandise trade deficit with the EU, which in 2024 amounted to $235 billion, according to U.S. Census Bureau data. The EU has repeatedly pointed to the U.S. surplus in services that in part redresses the balance.
The potential escalation between the EU and the U.S. is a big deal for financial markets, said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia. "If you get something similar to (the U.S.-China trade war in April), that's going to be very destabilising."
In an interview with NBC News published on Thursday, Trump said other trading partners that had not yet received such letters would likely face blanket tariffs.
"Not everybody has to get a letter. You know that. We're just setting our tariffs," Trump said in the interview.
'We're just going to say all of the remaining countries are going to pay, whether it's 20% or 15%. We'll work that out now,' Trump was quoted as saying by the network.