17 hours ago
TACO Trump vs EUCO Europe
European Councils, or 'EUCOs', are often largely pointless gatherings where EU leaders aimlessly pontificate about the politically impossible. Last night didn't disappoint. (Or, rather, it did.)
Amid Ursula von der Leyen's ramblings about building a non-US-led and non-China-inclusive alternative to the World Trade Organization, the summit also demonstrated that Europe is on the brink of capitulating on two issues of major economic importance.
The first, ironically, involves trade relations with the US.
Donald Trump has been widely pilloried in European media for pursuing a so-called 'TACO' approach to policymaking – short for 'Trump Always Chickens Out'. Critics, including yours truly, cite as examples the US president's recent decisions to suspend his trade war on China and pause sweeping 'reciprocal tariffs' on most other US trading partners.
Last night revealed that the EUCO acronym may be even more apt than previously realised. For the EU itself appears increasingly likely to chicken out of its initial flat refusal to accept a UK-style trade deal with the US, in which the bloc would be offered concessions on Tariff Man's metals and cars levies but would accept his 10% baseline levy on most other exports.
Von der Leyen herself laid the groundwork for the bloc's surrender earlier this week, when she suggested that Brussels' only red line in trade talks with Washington is its 'sovereign decision-making process': which, strictly speaking, doesn't even entail that the EU's actual decisions won't be sacrificed to appease The Donald.
Signs of Europe's growing pusillanimity, however, were on full display last night. Germany's Friedrich Merz, whose country's flagship auto sector is being ravaged by Trump's 25% car tariffs, urged the Commission to strike a 'quick and simple' deal with Washington before Trump's threatened 50% baseline duty on EU goods enters into force on July 9.
Belgium's Bart De Wever also explicitly refused to rule out accepting the 10% baseline. "Reveal[ing] how Europe is going to position itself in negotiations may not be the best way to come to a great result," he said.
Contrary to De Wever, Trump is as unlikely to pay attention to nuances in EU messaging as he is incapable of finding Belgium on a map.
Indeed, when Trump paused his reciprocal levies for 90 days on April 9, he was completely unaware that the EU had agreed that very day to slap retaliatory duties on €21 billion worth of US goods. (Brussels subsequently suspended the levies' imposition until July 14 – a 'reciprocal pause' that was, in truth, a reciprocal chickening-out.)
Admittedly, some EU leaders struck a more combative tone. Contradicting De Wever's call for carefully calibrated messaging, French President Emmanuel Macron suggested that the EU should hit US goods with a flat 10% levy if Trump's baseline isn't removed.
Macron's comments notwithstanding, the overall direction of travel is clear: the EU is far more willing than it was just a few weeks ago to accept a UK-style trade deal.
Such a policy shift not only makes a mockery of Brussels' previous claims that it would respond 'immediately' to Trump's duties with 'firm and proportionate' retaliatory countermeasures.
It is also politically bizarre. US Treasury Secretary Scott Bessent explicitly stated earlier this month that the July 9 deadline is 'highly likely' to be extended. Karoline Leavitt, White House spokesperson, reiterated this yesterday, stressing that the July 9 deadline is 'not critical' and 'could be extended'.
EU leaders, then, may very well be chickening out for little reason at all. Anything the US can do, EU can do meta In addition to surrendering on matters of trade, the EU yesterday also appeared to be on the verge of significantly watering down yet another sanctions package on Russia – assuming, that is, that Hungary and Slovakia eventually come around to endorsing it.
In particular, the EU's much vaunted 18th round of restrictive measures on Moscow, which leaders had previously suggested would be the most punishing yet, will probably not include the Commission's flagship proposal to lower the G7 oil price cap from $60 to $45 per barrel.
'I don't know if that [oil price cap] will be part of the 18th package of sanctions,' De Wever admitted following the summit, adding that lowering the cap 'seems to us like a good idea'.
Indeed, member states' reluctance to lower the cap comes in spite of the fact that von der Leyen's purported justification for dispensing with it – namely, the spike in oil prices triggered by the Israel-Iran war – is no longer valid.
Brent crude, the global benchmark, spiked at $75 dollars per barrel last week but has since fallen to $67: just one dollar more than when the Commission president announced the sanctions package in mid-May.
In a further potentially ironic twist, the EU's one success from the summit – also related to sanctions – may have come from a member state itself chickening out.
Hungary's Viktor Orbán, the most pro-Moscow leader in the EU, apparently couldn't muster the courage to confront other EU leaders on extending the bloc's existing sanctions on Russia, which had been set to expire at the end of July.
The rollover was approved "literally at the very, very end of the Council", De Wever said.
"People are already leaving the room, and [Council President] António Costa said: "Oh, I forgot one little thing, the rollover of the sanctions. I guess that's OK for everybody?' And it was approved in total silence."
The episode could be interpreted in one of two ways.
More optimistically, it could be a sign that the EU retains some negotiating prowess.
More pessimistically, it might be that the EU simply consists of chickens all the way down. Let's hope it doesn't. Economy News Roundup US approves subsidies for firms' operating costs. The move comes as part of a broader revision of the bloc's state aid rules, as Brussels scrambles to prevent energy-intensive industries from relocating to countries where power is cheaper, in particular China and the US. 'If Europe wants to lead in clean tech, we must act with courage and clarity,' said Teresa Ribera, the EU's competition chief. Read more.
US sectoral tariffs are 'unsustainable', says EU trade chief. The remarks come amid reports – officially denied by Brussels – that the EU could accept the US president's 10% baseline tariff on most European exports in order to avoid sector-specific import taxes on metals and cars. The veteran commissioner also suggested that a EU-US trade agreement could resemble the UK-US deal struck last month, which provides tariff exemptions for British steel, aluminium, and cars but leaves the 10% blanket duty in place. Read more.
Business activity in the eurozone stagnates in June. The eurozone's provisional composite Purchasing Managers' Index (PMI), which measures overall activity in services and manufacturing across the bloc, held steady at 50.2 for the second consecutive month in June – only marginally above the 50-point mark separating growth from contraction and below the 50.5 predicted by economists in a Reuters poll. 'The eurozone economy is struggling to gain momentum,' said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which compiles the index together with S&P Global. Read more.
