logo
The EU can play it cool with Trump's trade threats

The EU can play it cool with Trump's trade threats

Mint7 hours ago

London:Other governments have so far taken three main approaches to dealing with Donald Trump's trade threats. China hit back hard at the U.S. president's tariffs and got him to back down partly. Canada also retaliated and avoided some of the pain Trump inflicted on other countries. Meanwhile, Britain cut a quick deal that favoured the United States. None of these is a model for the European Union.
The 27-member group is not China. Though its bilateral goods trade, opens new tab with the United States last year was worth 70% more than between the U.S. and the People's Republic, opens new tab, the EU is not an autocracy that can outpunch Trump. If it antagonises the U.S. president, he might up the stakes by pulling the rug from under Ukraine and undermining the EU's defences. American hard power gives it what geopolitical strategists call 'escalation dominance'.
The EU is not Canada either. Ottawa was able to hang tough because its people were infuriated that Trump was trying to blackmail Canada into becoming part of the United States. While anti-Trump sentiment is high, opens new tab in the EU, politicians who are sympathetic to him, such as Poland's new president, can still get elected.
On the other hand, the EU is not the United Kingdom. Both are at risk from Russia's invasion of Ukraine. But the EU trades seven times more goods with the United States than Britain, opens new tab does - so Washington has more to lose if economic relations break down.
There is another way for the EU to handle Trump's threats: play it cool. That is more or less what the bloc is doing. It involves neither escalating the conflict nor accepting a bad deal. It means being open to a good agreement if the U.S. lowers its demands, but willing to play the long game if it does not.
One reason to buy time is to help Kyiv. The longer the EU has to prepare its own support package for Ukraine, which should include getting it a lot of cash, the less the damage if Trump ultimately cuts off all U.S. aid to the country.
The president's own vulnerabilities may also increase over time. Just look at the spectacular end of his alliance with Tesla, opens new tab boss Elon Musk. The fragile U.S.trade truce with China may break down causing more financial turmoil, making Trump less keen to pick a fight with the EU. If the Supreme Court stops him using emergency powers to impose tariffs, his negotiating position will be weaker. And tariffs could hurt the U.S. more than its supposed victims, by pushing up inflation and crimping growth.
Trump has zig-zagged in his trade threats and actions against the EU. The current state of play is that there are 50% tariffs on U.S. imports of steel and aluminium from the bloc, a 25% tariff on cars and 10% so-called reciprocal tariffs on most other goods.
The U.S. president has threatened to jack up these reciprocal tariffs to 50% if there is no deal by July 9. He is also looking at more 'sectoral tariffs', including on pharmaceuticals and semiconductors.
While the EU has complained to the World Trade Organization (WTO), it has delayed its own retaliation. Its negotiators accept that they are unlikely to overturn the reciprocal tariffs, the Financial Times, opens new tab has reported.
The bloc still aims to avoid the sectoral ones. Those on cars and any on pharmaceuticals would hurt it the most. It has dangled the possibility of buying more U.S. equipment and natural gas to get a deal.
An agreement on those lines could be good for the EU. It needs to beef up its defences and eliminate its purchases of Russian gas. While it would be best to have its own arms and energy supplies, buying more from the U.S. makes sense as an interim measure. An important nuance, though, is that the EU should reserve the right to take action against the reciprocal tariffs after the WTO issues its verdict, says Ignacio Garcia Bercero, opens new tab, a former senior EU trade official.
Such a pact would involve quite a climbdown by Trump. True, arms and gas purchases would narrow the U.S. goods deficit with the EU, which was $236 billion, opens new tab last year. But his administration has a host of other complaints including the bloc's value-added tax and food safety standards as well the digital taxes that some of its members impose on tech giants. It is hard to see the bloc agreeing anything in those areas, says Simon Evenett, professor of geopolitics and strategy at IMD.
Although the U.S. side described last week's trade talks with the EU as 'very constructive, opens new tab', discussions could easily break down. The question then is how the bloc would react if Trump imposed higher reciprocal tariffs.
The EU has so far imposed no countermeasures. Though it has agreed to tax 21 billion euros of U.S. imports in response to the steel and aluminium tariffs, it has delayed these until July 14 to try to get a deal. The European Commission, its executive arm, is also consulting on taxing a further 95 billion euros of U.S. imports in response to the car tariffs and the reciprocal ones. But added together, these tit-for-tat measures would be equivalent to only a third of the 379 billion euros of EU imports subject to Trump's tariffs.
Some analysts, opens new tab think the bloc needs to be tougher. One idea is to crack down on American services, where the U.S. had a 109 billion euro, opens new tab surplus with the EU in 2023. Another is to activate its 'anti-coercion instrument, opens new tab', which would allow retaliation against U.S. companies operating in the bloc. Yet another is to threaten to ban exports of critical goods, such as the lithographic equipment necessary to make semiconductors.
Extreme events may require extreme responses. But for now, the EU should keep its cool. It should not kid itself that it is stronger or more united than it is. It should remember that Trump may get weaker with time. And it should never forget Ukraine.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Apple faces AI delay, app store scrutiny and rivals' smart glasses push
Apple faces AI delay, app store scrutiny and rivals' smart glasses push

Business Standard

time9 minutes ago

  • Business Standard

Apple faces AI delay, app store scrutiny and rivals' smart glasses push

Apple is facing an unprecedented set of technical and regulatory challenges as some of its key executives are set to take the stage on Monday at the company's annual software developer conference. On the technical side, many of the long-awaited artificial-intelligence features Apple promised at the same conference a year ago have been delayed until next year, even as its rivals such as Alphabet's Google and Microsoft woo developers with a bevvy of new AI features. Those unfulfilled promises included key improvements to Siri, its digital assistant. On the regulatory front, courts in the US and Europe are poised to pull down the lucrative walls around Apple's App Store as even some of the company's former supporters question whether its fees are justified. Those challenges are coming to a head at the same time US President Donald Trump has threatened 25 per cent tariffs on Apple's best-selling iPhone. Apple's shares are down more than 40 per cent since the start of the year, a sharper decline than Google and also lagging the AI-driven gains in Microsoft shares. Apple has launched some of the AI features it promised last year, including a set of writing tools and image-generation tools, but it still relies on partners such as ChatGPT creator OpenAI for some of those capabilities. Bloomberg has reported that Apple may open up in-house AI models to developers this year. But analysts do not believe Apple yet has what technologists call a "multi-modal" model — that is, one capable of understanding imagery, audio, and language at the same time — that could power a pair of smart glasses, a category that has become a runaway hit for Meta Platforms. Google said last month it would jump back into this category, with partners. Such glasses, which are far lighter and cheaper than Apple's Vision Pro headset, could become useful because they would understand what the user is looking at and could help answer questions about it. While Apple has focused on its $3,500 Vision Pro headset, Google and Meta have seized on the smart glasses as a cheaper way to deploy their AI software prowess against Apple in its stronghold of hardware. Meta Ray-Bans all sell for less than $400. Analysts say Apple needs to answer that challenge, but that it is not likely to do so this week. "I'm not trying to replace my phone — this is a complementary thing that gives me more world context, because it's got a camera and it sees what I see, and I can talk to it in natural language," said Ben Bajarin, CEO of technology consultancy Creative Strategies. "Apple is not positioned to do that." To be sure, Apple's rivals are not decisively ahead in smart glasses. Anshel Sag, principal analyst with Moor Insights & Strategy, said Meta's Ray-Bans still lack some features and Google has not yet landed its "Gemini" model in a mass-market pair of glasses yet. "Meta has the undisputed lead, but Google is catching up fast and probably has the best-suited AI for the job," Sag said. "Vision Pro is great, but it's a showroom product that developers can use." But Bob O'Donnell, CEO of TECHnalysis Research, said it remains far from clear that smart glasses will gain wide acceptance. O'Donnell also said it is not certain that Apple is at any particular disadvantage if it partners with a company such as Google, OpenAI or even a smaller firm like Perplexity for core AI technology. So far, O'Donnell said, there is not yet strong evidence that consumers are basing major hardware-purchasing decisions on AI features. "There's an argument to be made that it's OK that (Apple) is behind because, except for the bleeding edge, most people don't care," O'Donnell said.

The hidden job crisis: 25% of Americans are functionally unemployed and it's worse than it sounds
The hidden job crisis: 25% of Americans are functionally unemployed and it's worse than it sounds

Time of India

time17 minutes ago

  • Time of India

The hidden job crisis: 25% of Americans are functionally unemployed and it's worse than it sounds

The unemployment rate in America seems low. However, a new report suggests a different story. The Ludwig Institute says the 'true' unemployment rate is much higher. It includes people working part-time or earning low wages. Black and Hispanic workers are affected more. The institute hopes to provide a clearer picture of the economic situation. This helps policymakers make better decisions. Tired of too many ads? Remove Ads The True Unemployment Rate Might Surprise You How LISEP Measures Who's Really Employed Tired of too many ads? Remove Ads Work full-time (35 or more hours per week) Earn at least $25,000 annually before taxes Why the Official Numbers Doesn't Show the Real Picture Who's hit the hardest? Black workers: 27% functionally unemployed Hispanic workers: 28% White workers: 23% Women overall: more likely to be functionally unemployed than men Why it matters Tired of too many ads? Remove Ads FAQs At first glance, the U.S. job market looks strong, as the unemployment rate remained near a 50-year low in April 2025 at 4.2%, and American employers added 177,000 jobs, even amid the uncertainty of tariffs and trade wars, as per a the 'true' rate of unemployment in the US in April was 24.3%, which rose 0.03% from the previous month, as per the Ludwig Institute for Shared Economic Prosperity (LISEP) data, reported Moneywise. LISEP's True Rate of Unemployment (TRU) includes the data of the unemployed people in the US and also the workers who are employed but still struggling, according to the Chair Gene Ludwig said, 'We are facing a job market where nearly one-in-four workers are functionally unemployed, and current trends show little sign of improvement,' quoted institute's metric, called the True Rate of Unemployment (TRU), redefines what it means to be employed, and unlike the Bureau of Labour Statistics, which counts a person as employed even if they worked as little as one hour in a two-week period, TRU focuses on whether that work is actually sustainable, according to the falling short of that, like part-time workers looking for more hours, those earning poverty-level wages, or people who aren't counted by the BLS because they stopped looking for work are included in the TRU, as per explained that, 'The harsh reality is that far too many Americans are still struggling to make ends meet, and absent an influx of dependable, good-paying jobs, the economic opportunity gap will widen,' as quoted in the official unemployment rate leaves out people who aren't actively job hunting, even if they want work, and in April, that included 5.7 million people, as per Moneywise. TRU includes them along with low-wage workers and the underemployed, offering a more complete view of who's actually making a living, according to the said the rate reported by the BLS is 'not technically false,' but is 'deceiving,' considering the number of Americans in the workforce who are 'employed on poverty-like wages' or 'on a reduced workweek that they do not want,' reported numbers are even more concerning when broken down by race and gender, as per Moneywise report:The institute also revealed that Black Americans have had a higher TRU than white Americans every single month since 1995, as per the says, this method, 'provide policymakers and the public with a more transparent view of the economic situation of all Americans, particularly low- and middle-income households, compared with misleading headline statistics,' quoted said, 'Amid an already uncertain economic outlook, the rise in functional unemployment is a concerning development,' adding, 'This uncertainty comes at a price, and unfortunately, the low- and middle-income wage earners ultimately end up paying the bill," as quoted in the reported by the Ludwig Institute for Shared Economic Prosperity (LISEP), which aims to show the full picture of employment in the exactly, because it's just limited. LISEP says it's 'not technically false,' but it doesn't tell the full story.

U.S., China begin key trade talks in London
U.S., China begin key trade talks in London

The Hindu

time19 minutes ago

  • The Hindu

U.S., China begin key trade talks in London

China and the United States began a new round of trade talks in London on Monday (June 9, 2025), Beijing's state media reported, as the world's two biggest economies seek to shore up a shaky truce after bruising tit-for-tat tariffs. The two sides are meeting in the historic Lancaster House, run by the U.K. Foreign Office, following a first round of talks in Geneva last month. Chinese Vice Premier He Lifeng was again heading the team in London. Chinese state news agency Xinhua reported the start of the talks. Also read | Trump calls China's Xi tough, 'hard to make a deal with' Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer are leading the U.S. delegation, President Donald Trump said Friday. "The meeting should go very well," Mr. Trump said on his Truth Social platform. His press secretary, Karoline Leavitt, told Fox News on Sunday: "We want China and the United States to continue moving forward with the agreement that was struck in Geneva." While the U.K. government reiterated that it was not involved in the discussions, a spokesperson said: "We are a nation that champions free trade." U.K. authorities "have always been clear that a trade war is in nobody's interests, so we welcome these talks", the spokesperson added. Rare earths The talks in London come just a few days after Mr. Trump and Chinese President Xi Jinping finally held their first publicly announced telephone talks since the Republican returned to the White House. Mr. Trump said Thursday's call reached a "very positive conclusion". Mr. Xi was quoted by Xinhua as saying "correcting the course of the big ship of Sino-U.S. relations requires us to steer well and set the direction". Tensions between the two nations have soared, with Mr. Trump accusing Beijing of violating a tariff de-escalation deal reached in Geneva in mid-May. "We need China to comply with their side of the deal. And so that's what the trade team will be discussing tomorrow," Ms. Leavitt said Sunday. A key issue will be Beijing's shipments of rare earths — crucial to a range of goods including electric vehicle batteries and which have been a bone of contention for some time. "Rare earth shipments from China to the US have slowed since President Trump's 'Liberation Day' tariffs in April," said Kathleen Brooks, research director at trading group XTB. "The US wants these shipments to be reinstated, while China wants the US to rethink immigration curbs on students, restrictions on access to advanced technology including microchips, and to make it easier for Chinese tech providers to access US consumers," she added. In April, Trump introduced sweeping worldwide tariffs that targeted China most heavily. At one point, Washington hit Beijing with additional levies of 145 percent on its goods, prompting China to respond with tariffs reaching 125% on US goods. After two days of talks in Switzerland, both sides agreed to slash the eye-watering tariffs for 90 days, but key differences remain -- especially over China's rare earth export restrictions. The impact was reflected in the latest official export data released Monday in Beijing. Exports to the United States fell 12.7%in May from the previous month, with China shipping $28.8 billion worth of goods. This was down from $33 billion in April, according to Beijing's General Administration of Customs. 'Green channel' Throughout its talks with Washington, China has also launched discussions with other trading partners — including Japan and South Korea — to try to build a united front to counter Trump's tariffs. On Thursday, Beijing and Canada agreed to regularise their channels of communication after strained ties. Beijing has also proposed establishing a "green channel" to ease exports of rare earths to the European Union, and fast-tracking approval of some export licenses. China is expected to host a summit with the EU in July, marking 50 years since Beijing and Brussels established diplomatic ties. According to a spokesperson for Starmer, Britain's finance minister Rachel Reeves took advantage of the talks in London to meet with her US counterpart Scott Bessent and Chinese Vice Premier He Lifeng on Sunday.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store