The European Union is difficult to understand. Despite its name, it is far from being a true political, fiscal, or even geopolitical union. National governments always have the final say in any legislative process, and major decisions are made unanimously. However, there is one area where the 27 ceded authority to the European Commission long ago to have more strength in the world: trade negotiations. This makes them slow, highly technical, often frustrating, but very solid and comprehensive, with a market of 400 million people behind it. The Swiss have suffered it, the British felt it in their own flesh after Brexit, and now Donald Trump is discovering it.
This Friday, the US president has once again attacked Brussels, resorting to his usual insults and complaints, threatening to impose harsh tariffs, up to 50%, starting on June 1. A crude but perhaps effective way to pressure the 27 to announce a detrimental trade agreement immediately, as the UK did a week ago, forced to appear alongside Trump and his team to celebrate a draft that is far from advantageous, even though it will still take months to finalize the general outlines of what they are discussing.
"The European Union, created with the main objective of taking advantage of the United States in trade, has been very difficult to manage. Its powerful trade barriers, VAT, ridiculous corporate sanctions, non-monetary trade barriers, currency manipulations, unjustified demands against US companies, among others, have generated a trade deficit with the United States of over $250 billion annually, a completely unacceptable figure," he wrote on his social media, making a mistake in the figure. "Our discussions with them are not bearing fruit! Therefore, I recommend a direct tariff of 50% for the European Union starting on June 1, 2025. No tariff will be applied if the product is manufactured in the United States," he added.
The consequence was another red day on Wall Street and European stock exchanges. At the close, the S&P500 lost 0.6%. The Dow Jones dropped by 0.7%. And the Nasdaq, which includes technology companies, fell by another 1%, after the president spoke again to the media but was unable to deliver a coherent speech. He seemed to say that negotiating with the Europeans was pointless because they do not listen, and that the decision was made: "I am not seeking an agreement." But at the same time, he expressed confidence that there will be no tariffs in the end because European companies will eventually relocate to the US. "Let's see what happens," he left hanging, lamenting the alleged mistreatment by the EU.
This outburst, not coincidentally, occurred on the same day that the EU Commissioner for Trade, Maros ¦efovi, was scheduled to speak with the US Trade Representative, Jamieson Greer. Putting pressure and trying to divide, as the Brexiteers did. This role is now being played by Treasury Secretary Scott Bessent, stating on television that the Europeans are the only ones "not negotiating in good faith" with them, sowing discord to see if the capitals will quarrel with Brussels. "The EU has a collective action problem. There are 27 countries, but they are represented by a single group in Brussels. So, as I have been told, the countries do not even know what the EU is negotiating on their behalf," he said.
"I have spoken with Jamieson Greer and Howard Lutnick. The EU is fully committed to an agreement that benefits both parties. The European Commission remains willing to work in good faith. Trade between the EU and the US is unparalleled and must be guided by mutual respect, not threats. We are ready to defend our interests," Vice President ¦efovi responded firmly, rejecting the words of the heads of their direct counterparts.
Washington does not quite understand the technical, laborious negotiation process. Europe and the US failed to close a free trade agreement with Obama, broke off negotiations with Trump in his first term, and nothing was achieved with Biden. These are agreements that take years, even decades, that cannot be improvised or settled in a few days. That is why it is even more painful now. "It is not surprising that Trump is now targeting Europe, now that the US and China have agreed to a trade truce. Trump's demands seem to reflect the deep frustration of the United States with the EU's professional, calm, and bureaucratic approach to trade negotiations, which contrasts with Trump's willingness to quickly sign agreements that look appealing, even if in practice they mean very little," notes Agathe Demaraeis, a researcher at the European Council on Foreign Relations.
Choosing the verb to describe what is happening is complicated. Trump operates on instinct, he reacts. If the S&P500 approaches 5000 points, he gets scared and backs off. If it goes to 6000, he accelerates. His tactic involves desensitizing the markets. He announces brutal tariffs, there are billion-dollar losses, and then partially withdraws them, but not entirely, and the stock markets rise again. He believes that this way, little by little, they can swallow it. But there are many doubts, and that is why the message about Europe immediately turned the markets red. Bank stocks and oil prices plummeted immediately. Money quickly sought refuge in government bonds from other countries or in currencies like the Swiss franc and the Japanese yen, weighing down the dollar. Gold, once again, surged.
The three main indices on Wall Street did not suffer huge losses, but declines between 0.6% and 1%. But this new shake-up comes at a time when his fiscal policy, culminating this week around a legislative proposal he has dubbed the big, beautiful Bill, the beautiful law, despite adding tens of billions of dollars to the public deficit, has also caused tensions in the debt markets, pushing 10 and 30-year bonds to maximum levels, between 5.1% and 4.6% respectively.
And if that were not enough, the president has lashed out against Apple and its top executive. The politician who boasted of a free market and of bringing a golden era, attacking by name his main companies. He did it with the retail giant Walmart, urging them to "eat" the costs of tariffs and 'forbidding' them from passing them on to consumers. And he does it with the tech giant, telling them that they must manufacture their phones, at least those used in the US, domestically. Something unfeasible in the short term and that would, in any case, skyrocket their prices, perhaps doubling the current ones, according to analysts. "I informed Tim Cook a while ago that I expect iPhones sold in the US to be manufactured and assembled in that country, not in India or anywhere else. If not, Apple will have to pay a tariff of at least 25% to the US," he stated.
Later, in the Oval Office, he added that the same warning applies to Samsung and others, "because otherwise, it would not be fair." But in this way, he aims to achieve the impossible, that all companies wishing to trade with the US must produce their products there. An economic absurdity if taken to the extreme.