Steven Okun on Trump's tariff war
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Sign up now: Get ST's newsletters delivered to your inbox US President Donald Trump has threatened a 30 per cent tariff on European goods starting on Aug 1, unless the US and EU agree a trade deal. BRUSSELS - The EU is ready to retaliate to safeguard its interests if the US proceeds with imposing a threatened 30 per cent tariff on European goods starting on Aug 1, European Commission President Ursula von der Leyen said on July 12. However, Dr von der Leyen, head of the EU executive which handles trade policy for the 27 member countries of the EU, said it was also ready to keep working towards an agreement by Aug 1. 'Few economies in the world match the European Union's level of openness and adherence to fair trading practices,' she said, in response to new threats by US President Donald Trump on July 12 escalating a trade war Europe had hoped to avoid. 'We will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required,' she said, of possible retaliatory tariffs on US goods entering Europe. European capitals swiftly backed that position. 'As part of European unity, it is more than ever up to the Commission to assert the Union's determination to defend European interests resolutely,' French President Emmanuel Macron said on X. German Economy Minister Katherina Reiche urged a statement for a 'pragmatic outcome to the negotiations'. Top stories Swipe. Select. Stay informed. World US slaps 30% tariffs on EU and Mexico; EU warns of countermeasures Singapore S'pore shows what's possible when digital innovation is matched with purpose: UK foreign secretary Singapore Casual racism should be tackled by getting more people to understand it is not acceptable: David Neo Asia Fuel was cut off during take-off: Preliminary report on Air India crash Singapore Pulling back the curtain: A backstage look at the 2025 NDP show segment Singapore $3 cashback for hawker centre meals and shopping at heartland stores with DBS PayLah initiative Singapore Body of 62-year-old man recovered from waters off East Coast Park Asia Aerobridge hits Qantas plane at Sydney Airport, damaging engine, delaying flight 'The tariffs would hit European exporting companies hard. At the same time, they would also have a strong impact on the economy and consumers on the other side of the Atlantic,' she said. Spain's Economy Ministry backed further negotiations but added that Spain and others in the EU were ready to take 'proportionate countermeasures if necessary'. Mr Trump has periodically railed against the European Union, saying in February it was 'formed to screw the United States' and asking why Europe exports so many cars but buys so few US cars in return. His biggest grievance is the US merchandise trade deficit with the EU, which in 2024 amounted to US$235 billion (S$300 billion), according to US Census Bureau data. The EU has repeatedly pointed to the US surplus in services, arguing it in part redresses the balance. Combining goods, services and investment, the EU and the United States are each other's largest trading partners by far. The American Chamber of Commerce to the EU said in March the trade dispute could jeopardise US$9.5 trillion of business in the world's most important commercial relationship. 'Europe must not allow itself to be intimidated by this, but must soberly seek a solution at the negotiating table on equal terms,' said Mr Dirk Jandura, president of the German exporters association BGA, adding the latest threats were a 'well-rehearsed' part of his negotiating strategy. Mr Carsten Brzeski, global head of macro at ING, said Mr Trump's move suggested that months of negotiations remained deadlocked and that things were inching towards a make-or-break moment for the transatlantic trade relationship. 'The EU will now have to decide whether to budge or to play hardball,' he said. 'Its hard to draw real conclusions right now other than this will bring market volatility and even more uncertainty.' Mr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted that the brunt of the US tariffs, if implemented, would be felt by US consumers. 'The EU should take a hard line in negotiations, because model calculations show that tariffs against the EU have a stronger negative effect in the US than in the euro zone.' That said, there would also be clear repercussions for the euro area economy, already struggling with weak growth. The European Central Bank had used a 10 per cent tariff on EU exports to the US as the baseline in its latest economic projections, which put output growth in the euro area at 0.9 per cent this year and 1.1 per cent the next and 1.3 per cent in 2027. It said a 20 per cent US tariff would curb growth by 1 percentage point over the same period and also pull down inflation to 1.8 per cent in 2027, from 2 per cent in the baseline scenario. It did not even offer an estimate for the possibility of a 30 per cent tariff. REUTERS
Business Times
9 hours ago
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New Trump tariff threats rekindle investor concerns about trade and timelines
GLOBAL investors got a harsh reminder of the risks around trade tariffs and US President Donald Trump's deal-making on Saturday (Jul 12), after he threatened fresh tariffs on his biggest trading partners in Europe and Mexico. Trump said in social media posts on Saturday he would impose a 30 per cent tariff on imports from Mexico and the European Union starting on Aug 1. The announcement comes after weeks of talks with key US trading allies that failed to reach a more comprehensive trade deal. It also follows a week marked by heightened trade tensions, after Trump issued new tariff announcements for a number of other countries, including Japan, South Korea, Canada and Brazil, as well as a 50 per cent tariff on copper. 'Escalate to de-escalate' The EU had hoped to reach a comprehensive trade agreement with the US, but Trump's letter punctured the recent optimism in Brussels over the prospects for an 11th-hour agreement between the major economies. He did, however, leave an opening for additional adjustments. 'If you wish to open your heretofore closed trading market to the United States, and eliminate your tariff, and non-tariff, policy and trade barriers, we will, perhaps, consider an adjustment to this letter,' Trump wrote. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up European Commission President Ursula von der Leyen said the bloc 'took note' of Trump's letter and warned that such a move would damage both economies. The bloc's ambassadors are scheduled to meet Sunday to discuss the trade situation. 'We remain ready to continue working towards an agreement by Aug 1,' von der Leyen said in a statement. 'At the same time, we will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required.' Three EU officials told Reuters on Saturday that Trump's 30 per cent tariff threat is a negotiating tactic. Michael Brown, a senior market strategist at Pepperstone in London, said it seemed to be a 'escalate to de-escalate' strategy by Trump, aimed at getting trading partners to negotiate and extract concessions. The EU had been facing the threat of US tariffs at 50 per cent on its steel and aluminium exports, 25 per cent on cars and car parts, and 10 per cent on most other products. The US had also been looking into further tariffs on pharmaceuticals and semiconductors. Brown said the risk was that the EU takes the new tariffs poorly and announces countermeasures that escalate trade tensions to levels in early April, when markets were whipsawed by Trump's initial 'Liberation Day' tariffs. 'Depending on what happens in the next 24 hours or so, I imagine that the knee-jerk move is euro-negative, eurozone asset-negative,' he said. 'And then, as calmer heads prevail, it comes back to the fact that, is it just a negotiating gambit?' Despite some modest rockiness this week, the benchmark S&P 500 ended down just 0.3 per cent on the week, not far from record-high levels. European stocks took a slight hit on Friday as markets waited for the promised letter on tariffs. The pan-European Stoxx 600 index lost 1 per cent and snapped a four-day winning streak, clocking its biggest single-day decline in over three months. Mexico has more to lose, given that the US is its largest export market, and the economy is already feeling the impact of the uncertainty over trade. In his letter to Mexican President Claudia Sheinbaum, Trump said the country has been 'helping me secure the border', but added that it was not enough. Trump added that if Mexico 'is successful in challenging the cartels and stopping the flow of fentanyl', the US would consider adjusting the levies. 'These tariffs may be modified, upward or downward, depending on our relationship with your country,' he added. The letter is silent on whether the US will preserve a carve-out for goods traded under the United States-Mexico-Canada Agreement, which have been exempt from the current 25 per cent rate. The administration has said it will keep the exemption for Canada. 'Moment of capitulation' US stocks have rebounded after plunging in April following Trump's announcement of sweeping global tariffs. Trump had paused many of those steep tariffs, but issued new levies this week with an Aug 1 date for them to go into effect. The CBOE Volatility Index, Wall Street's 'fear gauge', closed on Thursday at 15.78, its lowest closing level in nearly five months, although it moved back above 16 on Friday. Karl Schamotta, chief market strategist at payments company Corpay in Toronto, said the stream of tariff announcements could reignite market concerns. 'At some point soon, it will become clear that Trump's protectionist agenda has not been appropriately discounted in currencies, in asset prices, or in measures of volatility,' he said. 'A moment of capitulation is coming, in financial markets, or in the White House itself.' While markets are less sensitive to headlines than a few months ago, Citi strategist Scott Chronert said in a note on Friday that 'we will need some positive trade developments by the White House's Aug 1 deadline to hold recent equity market gains'. The current weighted average tariff in the US is about 16 per cent, up from 2.5 per cent at the start of the year, UBS economists said on Friday. That would rise to about 18 per cent, including the country tariffs announced in this week's letters. REUTERS, BLOOMBERG
