The European Commission is determined not to let all its negotiating energy be absorbed by dealing with and limiting damage to the US. One of the consequences of Trump’s global tariff war is the significant increase in the number of countries seeking to negotiate trade deals with the EU.
By Gideon RACHMAN
Like Donald Trump, the European Union prides itself on its mastery of the art of negotiation. The main event in Brussels is the summit that ends at 3 a.m., where weary negotiators emerge with a new and complex agreement.
The EU’s way of reaching agreements is almost the opposite of the White House’s style. The American president is impulsive, moves quickly, makes extreme demands and is willing to break all the rules. Europeans are legalistic, methodical and always looking for compromises and trade-offs. Trump’s style is more sensational and creates more attractive headlines. The EU’s is quieter, but much more effective.
The question of which type of deal-making works best – the drudgery of Brussels or the chaos of Mar-a-Lago – is more than a matter of pride. The future of the global economy may depend on it. Both the EU and the US are currently trying to reach new trade agreements. They also urgently need to resolve their differences before July – when Trump’s 90-day suspension of “reciprocal” tariffs on the EU ends.
The EU-US trade relationship in goods is significantly larger than that between the US and China. Transatlantic trade in services is also much denser.
America’s tariffs on EU goods are currently 10 percent. But they are set to rise to 20 percent in July. The EU is also being hit hard by 25 percent U.S. tariffs on cars, steel and aluminum, with threats of further tariffs on pharmaceuticals. With these risks, the European Commission is doing everything it can to defuse the trade battle with the Trump administration – and not turn it into an ideological war or showdown. But Brussels bureaucrats are confused in their confrontation with their counterparts in Washington. One of the biggest problems is that it is not clear who in the Trump administration actually has the authority to negotiate. Europeans are offering to buy more American products, but they cannot accept permanent tariffs at current levels. Some in Brussels fear that, come July, the Trump administration will simply extend the current regime for another 90 days of negotiations.
Then, the EU must make decisions. Will it finally retaliate, and to what extent? The general assumption is that Europeans will feel compelled to react. The other question is whether the response will be limited to trade in goods, where the EU has the most to lose, and to its particularly vulnerable auto industry.
American technology companies are a much more attractive target than Harley-Davidson or Bourbon. But Brussels bureaucrats should also consider the possibility that the Trump administration might respond asymmetrically to the tech sanctions by withdrawing American troops from Europe. That would make the continent much more vulnerable to Russian aggression.
Given these unpleasant possibilities – and the unpredictability of the White House – Europeans are doing what comes naturally to them: they are acting slowly and cautiously. It has been a little over a month since Trump’s “liberation day” tariff announcement, and much has already changed. The safest prediction is that there will be much more unrest in the next 60 days.
Like the Chinese, Europeans are waiting to see if gaps will start appearing on American supermarket shelves. They also know that potential tariffs on pharmaceuticals, while very painful for Europe, could trigger a strong reaction in the US as the prices of vital medicines would rise sharply.
The best-case scenario for Europeans is that the contradictions and self-inflicted damage of Trump’s tariffs become increasingly apparent as July approaches, leading to a much more favourable offer for Europe than currently seems likely. The European Commission is determined not to let all its negotiating energy be absorbed by dealing with and limiting the damage to the US. One of the consequences of Trump’s global tariff war is a significant increase in the number of countries seeking to negotiate trade deals with the EU.
India’s commerce minister, Piyush Goyal, was in Brussels last week. A new deal is expected to be signed between the UK and the EU this month – resolving some of the most difficult issues left over from Brexit. The United Arab Emirates opened talks on a free trade agreement with the EU a few weeks ago. Long-stalled trade talks with Australia have resumed. A deal with the Latin American bloc, MERCOSUR, has been reached and awaits ratification. China is also keen to warm up trade relations with Brussels – although the Europeans will move cautiously in this direction.
Countries lining up to go to Brussels will find a slow and bureaucratic EU. The deals that Trump tries to conclude in a few weeks with the EU take years. But, on the other hand, as one Australian negotiator puts it: “The good thing about the EU is that when you finally reach a deal with them, you know they will stick to it.”
The EU has already signed roughly twice as many free trade agreements as the US, and is well-positioned to conclude even more. The Brussels-style art of negotiation has its own peculiarities and frustrations. But it is far more serious and sustainable than Trump’s version.
