Between ‘rollover UK' and ‘retaliatory China': will EU hardball secure trade deal with US?

The Guardian

10 hours ago

In Brussels' corridors of power, quiet optimism is growing that the EU's hardball strategy to secure a US trade deal is working. While Britain quickly moved to try to cushion the impact of Donald Trump's tariffs with a deal agreed last month – and US-Chinese relations are a tit-for-tat situation – the EU has taken a different stance. 'We are positioning ourselves between 'rollover UK' and 'retaliatory China',' said a Brussels source.
The stakes are not just the £706bn in transatlantic trade between the EU and US but the fallout from what diplomats and businesses say is a dangerous assault on the global rules-based system that governs western democracy.
'The only thing that appeals to Trump is power. Amid all the nausea and uncertainty here, there is a significant chance the EU will go the whole way and not do a deal,' said a diplomat in the Belgian capital.
'If the EU doesn't stand up to Trump or demand the rigours of rules, the question will be: what is left of the international rules based system?' the source added, noting the risk to employment rights, free speech, social welfare and public care.
The EU's steadfast strategy is high-risk, and has weeks to play out before the 90-day pause in Trump's threat to impose 20% tariffs on all EU imports ends in July. He has already slapped a 10% tariff on all exports, with more on autos and steel, which this week went to 50%.
'If in the end, if we are the only ones on the pitch, people will start to say we should have been more like the Chinese,' said one EU official, with demands for retaliation expected to arise 'very quickly from member states'.
The biggest pothole in what threatens to be a bumpy road ahead may be a Nato summit on 24 June when Trump, who has shown visceral antipathy towards the EU, may find fault in what he considers freeloading allies.
Right now, EU member states are united in their resolve not to capitulate in the face of his demands, which include the removal of non-tariff barriers such as food standards.
'What the US is doing has brought us together, and there's a sense of urgency of that cooperation within the 27 that is quite important,' says one diplomat.
There is even a growing acceptance that US tariffs of more than 10% are a long-term reality. 'Ideally less than 10%, so it doesn't look like we have rolled over,' says one Brussels official. Before Trump took office for the second time the average tariff on US imports in the EU was about 2.5%.
The EU's chief negotiator, Maroš Šefčovič, said on multiple occasions this week that he was 'optimistic' a deal would be done, but back at base, trade war preparations continue. 'We are keeping the gun on the shelf. We don't want to use it, but we want them to know it is there,' said one diplomat.
Šefčovič said on Friday he had held another call with the US secretary of commerce, Howard Lutnick. 'Our time and effort fully invested, as delivering forward-looking solutions remains a top EU priority. Staying in permanent contact,' he wrote on X.
Meanwhile, twin talks took place this week in Paris at the Organisation for Economic Co-operation and Development and in Washington with a team of EU officials led by Tomas Baert, trade adviser to the European Commission president, Ursula von der Leyen.
Those talks helped 'clean the slate, clear the table', Šefčovič told a conference organised by the European Policy Centre, a thinktank, on Thursday in Brussels.
He added that he had also discussed the continued threat of sectoral tariffs on pharmaceuticals and semiconductors with the US trade representative Jamieson Greer in Paris.
Šefčovič said his message was that the US and the EU had mutual interests in re-industrialisation on both sides of the Atlantic, and in minimising China's unstoppable rise in key sectors such as electric vehicles and steel.
'Any obstacle in the middle of the Atlantic would simply make them less competitive and more vulnerable. This is the diplomatic, political but also very technical discussions we are having,' he said.
Up to now negotiations have been somewhat hampered by the parallel universe occupied by the US president, and White House and EU officials.
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Last month, Trump, out of the blue, threatened and then unthreatened to slap a 50% tariff on all EU imports, claiming Brussels was dragging its feet 'to put it mildly'.
'This came as a surprise to Maroš, because he had been in talks since February,' said one source. 'But because this is an imperial court, it is the emperor who will decide when talks are happening.'
The volatility in the transatlantic relationship on European business is unprecedented.
'I have been here 10 years and I have never seen this level of nervousness, not during the pandemic, not after the invasion of Ukraine,' said a director at one trade group representing dozens of multinationals in Brussels, who declined to be named.
Luisa Santos, the deputy director general at Confederation of Business Europe, which represents 42 national business federations, said trade would, like water, find its course but investment could prove the collateral damage.
'The whole basis of trade is WTO [World Trade Organization] rules,' she said. 'We agreed on the rules and they were accepted the consequences. Now the rule is the power game: 'I will impose what I think is best for me, and the bigger players with more power determine the rules and that is a huge change.'
Santos added: 'I think the biggest shock in Europe is that we were supposed to be the traditional allies. But now we are basically put on the same basket as China.'
Kyle Martin, the vice-president of European affairs at the General Aviation Manufacturers Association, whose members include Boeing and Airbus, said tariffs would end a 45-year-old US-EU agreement that aviation construction, which relies on a global supply chain, was duty-free.
A Boeing 787 gets its front fuselage from Italy, its wings from Japan and doors from France, with assembly at home in Seattle, he pointed out.
'I don't see this having a positive [outcome] for either Boeing or Airbus or any other manufacturer. Everyone will be impacted because everyone's got an interconnected supply chain.'
But while negotiations with the US continue, new EU agreements with India, Thailand, the Philippines, Indonesia, South Africa and Australia are also on the cards.
Ultimately it is the profound shift in the world order that is bothering many in Brussels.
The US was behaving 'like a very unevolved state', said one EU source, like a developing country that relied on customs duties for national revenue in the absence of income tax, corporate tax and VAT. 'Maybe this is what Trump wants, a smaller, leaner weaker state where everybody has to pay for themselves,' they said.