Cliff Notes
- President Trump‘s threat of 50% tariffs on EU exports signals a return to aggressive trade negotiations via social media, raising potential retaliation concerns.
- This tactic interrupts a temporary calm in global trade, following recent negotiations that had begun to reduce US-China tariff tensions.
- European stocks, particularly in the automotive sector, have reacted negatively, marking a decline following Trump’s announcements on tariffs.
Trump’s latest phone negotiation tactic on tariffs likely to heighten EU retaliation threat | Money News
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President Trump’s Friday flurry of pronouncements marks the return of negotiation by smartphone and may trigger another period of profound uncertainty for international trade and financial markets.
The threat of 50% tariffs against the European Union, issued hours before his trade representative met their European counterparts, is a show of presidential muscle surely designed to strongarm those on the other side of the table.
It is an escalation likely to heighten the threat of retaliation from Europe, and with a few keystrokes ends the brief period of calm that had returned to global trade and markets in recent days.
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Talks in Switzerland between US and Chinese delegations a fortnight ago took the sting out of Sino-American hostility, negotiating three-figure tariffs that amounted to a mutual trade embargo down to manageable levels.
Financial markets had regained most of the losses sparked on ‘Liberation Day’ in April, when Donald Trump declared total trade war, and there was optimism that for all his bluster, there might be meaningful room for constructive compromise.
The UK even secured a deal of sorts, securing a reduction in auto tariffs in exchange for a reciprocal opening of agricultural markets.
There will be no such deal for the EU in a hurry. A 50% tariff on all exports to the US is not only higher than the original threatened blanket tariff of 20% and double Mr Trump’s proposed 25% on European cars, it’s higher even than China.
European stocks predictably ended the week in decline, with car manufacturers including BMW, Volkswagen and Stellantis all down.
It remains to be seen whether this threat will stick.
Mr Trump has repeatedly blinked first in the trade war he started, backing down on global reciprocal tariffs when bond markets rebelled before caving in Geneva to reach an accommodation with China.
His grievances with Europe appear to have an extra edge however, and the consequences of the uncertainty he’s sparked will be far-reaching.
If this was the only thing he had announced on ‘Liberation Day’ it would still have been huge.