Turning the other cheek does not work when dealing and negotiating with Donald Trump. The European Union, which is anything but naive, realized this the hard way once again this Saturday, after the unilateral imposition of a 30% tariff on all EU products. The figure is disproportionate, unsustainable. Three times what is currently in effect, 50% more than the already brutal 20% announced by the White House on April 2. And above all, twice what European negotiators were considering in recent days. A destabilizing blow that has much to do with geopolitics, ideology, lobbying, and even extortion, and very little with commercial negotiation.
Trump announced it, on a Saturday when the market was closed, in his new preferred format: a letter sent to governments, or in this case to the President of the European Commission, Ursula von der Leyen, posted shortly after on his social media. A missive that leaves his counterparts speechless with unprecedented language in diplomatic relations, considering the most protectionist barriers in over a century as a gift and a reason for celebration, as it implies that the U.S. has decided to continue dealing with its partners, instead of breaking off relations altogether. A toll in exchange for the "honor and privilege" of continuing to trade "with the number 1 economy in the world."
The letters are Trump's way of covering up that he had given a deadline until July 9 to the rest of the world and has had to extend it, at least, until August 1. And a pressure tactic, conveying to his former allies, now treated as enemies, that they have three weeks to reach a less burdensome trade agreement. The ambassadors of the 27 in Brussels were summoned to an emergency meeting on Sunday, and on Monday, the ministers will meet face to face. But many capitals are still in a state of denial, or dream of saving their privileged relationship with Trump. This is the case of Giorgia Meloni, who in a statement this Saturday said that "it is essential to focus on negotiations, avoiding polarization that would hinder reaching an agreement" since "especially in the current context, it would not make sense to trigger a trade war between both sides of the Atlantic." The trade war has been ongoing for months, declared by the U.S., and if Europe does not show up, it will inevitably lose.
"Being kind and giving up the digital tax has not served Europe well. It is essential to take smart retaliatory measures, even if in the short term they lead to dangerous economic and geopolitical waters (yes, the Trump administration could redouble its efforts, until it eventually backs down). Smart retaliation means something very different from the uniform U.S. tariff (which is probably as bad for the United States as it is for Europe): it means going, product by product, for what hurts the most (politically or economically) and hurts the EU the least," reacted Olivier Blanchard, former chief economist of the IMF and one of the most followed and respected experts in the world.
"We need to think about a common smart retaliation, not only from the EU, but also from Japan, Canada, Brazil, and whoever is willing to participate. The more countries, the better. By reducing more sources of supply, common tariffs on some products harm the U.S. more; by expanding the common economic market, they harm the coalition less. So far, we have missed an opportunity, as there was plenty of time to prepare. The goal is not to impose high tariffs on both sides, but to get the U.S. to back down and adopt a reasonable stance," adds the French expert.
Their president, Emmanuel Macron, seems to think similarly, although no one seems to be seeking a coordinated coalition of affected parties, and each one is waging the war on their own hoping for a miracle to turn the situation around. "This announcement comes after weeks of intense work by the Commission in negotiations with the United States, based on a solid offer made in good faith. With European unity, it is more important than ever for the Commission to assert the Union's determination to firmly defend European interests. This implies accelerating the preparation of credible countermeasures, mobilizing all instruments at its disposal, including those for combating coercion, if an agreement is not reached before August 1," stated the French president.
So far, only China has openly confronted Trump. They never entered his game, responded with powerful tariffs and restricted access to their rare minerals, and while they have negotiated to temporarily lower the tariff on their exports by up to 30%, far from the 145% that had been imposed, they have not given up on retaliations or bought into the American's discourse, framework, or strategy, who has shown since January that he is only highly sensitive to market forces. Both from the stock market and from investors in his public debt. Every time Wall Street has trembled, the president has backed down, earning him the hurtful nickname of TACO, the acronym in English for Trump Always Caves Over.
The EU understands perfectly, like the governments of the rest of the world, that the letters are a maneuver. A distraction on one hand, so that American citizens forget that their president promised them "90 trade agreements in 90 days" and has not been able to close any, even though he announced and boasted of something similar with the UK and Vietnam, which remain completely open. And to confuse investors with ambiguity, as it is not clear if it is a punishment, a pause with an extension, an acceptance. In April, American savers lost trillions of dollars in a few days out of fear, but gradually the market has become accustomed to the ups and downs, changes of opinion, even to the increasingly clear threats against the independence of the Federal Reserve. Since April, the S&P 500 has risen by 30% again, and investment banks are telling their clients that there will be no catastrophe and that the president will settle for lower tariffs, manageable for the rest.
JPMorgan's CEO, Jamie Dimon, summed it up on Thursday: "Unfortunately, I think there is some complacency in the market. The market assumes that much of this tariff policy will disappear, and I don't think that will be the case." The president, with his chaotic style, has partly tamed the world of money, which seems to overlook that it is not just rhetoric. Trump has always been fascinated by tariffs, believing they can bring hundreds of billions of dollars in revenue to his country without resulting in higher prices thanks to his brilliant negotiating skills. The market does not believe it, but assumes that it is all a show and that in the end there will be understandings. Even if he has reinstated a 30% tariff on Mexico and a 35% tariff on Canada, his neighbors, main partners, origin of many products and essential labor.
But even knowing all this, for the EU, the great regulatory and commercial power, the bloc that sees itself as a moral beacon and presents itself as an example of "openness and adherence to fair trade practices," in the words of Von der Leyen yesterday, it is especially painful. The European Union chose not to respond after Trump's first unilateral imposition, arguing that since a few days after imposing a 20% tariff, he would have paused it for 90 days, peace had to be given a chance.
With that, European countries swallowed a flat 10% tariff on all products. They accepted the 25% on cars and 50% on aluminum and steel. And they were not planning to respond to the 50% on copper either. The governments, in NATO format, bowed to Washington's demand to commit to a 5% Defense spending in the next decade, something that can only be achieved by pouring euros into American companies. And they did so, moreover, through the NATO Secretary-General, with a submissive language and attitude, of vassalage. Thanking.
The United States wants much more, and if the EU does not stand up with much more aggressiveness, it can achieve it. The European tax system is in its sights, with VAT as Trump and his team's great obsession, which inexplicably they label as an unfair tariff when it is not. The White House wants Brussels to grant absolute freedom to the big tech companies, which have been fined, penalized, or warned for their anti-competitive practices, taking advantage of their dominant position. Or for not complying with the rules of the Directive on Digital Services, which imposes restrictions and obligations on social networks with millions of users. And the US also wants, and has achieved, that the European Commission, in the midst of this negotiation, agrees to forget about a tax on digital companies, just like Canada had to do.
Europeans have opted for prudence, for restraint, for negotiation without stridency, and Trump's response has been tariffs of 30%, even higher than the 20% in April, which were already absurd. The White House established them using a completely unscientific formula, which does not take into account at all possible tariff or other trade restrictions, but only the trade deficit of each country or bloc with the US. Of course, only for goods, because obviously the scenario changes when it comes to services.
"Imposing a 30% tariff on EU exports would disrupt essential transatlantic supply chains, to the detriment of companies, consumers, and patients on both sides of the Atlantic. The EU has consistently prioritized a negotiated solution with the US, reflecting our commitment to dialogue, stability, and a constructive transatlantic partnership. We remain willing to continue working towards an agreement before August 1. At the same time, we will take all necessary measures to safeguard the interests of the EU, including adopting proportionate countermeasures if necessary," timidly responded the President of the European Commission in yet another statement. This has earned her criticism from all sides, from friends and foes alike.