Trump's law of the jungle means U.S. trade deals aren't worth the paper they're printed on, trade expert warns
When President Trump threatened Brazil with punishing tariffs on Wednesday, there was no fancy mathematical equation trotted out this time as justification.
The 50% levy on goods was retribution for a perceived 'witch hunt' against his political ally, Jair Bolsanaro, whose supporters attempted a coup two years ago.
This administration is bringing back the law of the jungle to international trade, according to trade expert Kristen Hopewell, and time is running out to salvage the remains of a post-war system of commerce that promoted stability and prosperity across the world.
'Trump is a totally unreliable negotiating partner,' she tells Fortune. 'Any deal you strike with the administration is not worth the paper it's written on.'
As if to hammer home that point, news began to emerge on Thursday that Vietnam had been caught off guard when Trump prematurely announced a 20% duty on all goods entering the U.S. from the southeast Asian country. Vietnamese officials were reportedly still hoping for a number closer to half that.
Nor is there any apparent rhyme or reason to his tariffs. Brazil, for example, doesn't even run a trade surplus with the United States—it imported $28.6 billion more goods and services from the U.S. last year than it exported. On Wednesday, when asked how he calculated his various import duties, the president answered that he uses 'a formula based on common sense,' one that reflects 'how we've been treated.'
Hopewell, a professor at the University of British Columbia, argues this erratic and fickle approach to international negotiations is symptomatic of a Trump deal: 'He can simply come back later demanding more. There's no guarantee it will actually be upheld.'
That's because the president already removed a cornerstone underpinning global commerce during his first administration six years ago when he blocked all appointments to what is essentially the supreme court of the World Trade Organization (WTO) — its Appellate Body.
'The WTO is unique amongst international organizations in that its rules are actually legally binding on states. It has teeth,' Hopewell said. Or rather it had teeth.
Since the Biden administration continued its policy of blocking appointments to fill its vacancies, there is now no quorum to adjudicate trade disputes, leaving countries little incentive to abide by the rules anymore. Quite the contrary, they can break them with near impunity.
The United States didn't always favor dismantling these guardrails.
Over a decade ago, the country led a number of key partners, including Japan and the European Union, to press their rights against China when it attempted to restrict the export of critical minerals, including rare earths.
In 2015, they later won in front of the Appellate Body, forcing Beijing to relent.
Thanks to Trump, this enforcement mechanism no longer works.
In January 2020, just weeks after the WTO's Appellate Body was decommissioned, Indonesia moved to impose a ban on the export of raw nickel.
Since it has one of the largest remaining deposits of this element vital for electric vehicle batteries and stainless steel, it reckoned it could compel the creation of a domestic downstream industry for processing and refining the ore.
Other countries argued in front of the WTO that it violated the rules and won—or at least they thought they had.
Indonesia exercised its right to lodge a formal appeal to the Appellate Body, knowing full well that a ruling that settles the dispute was impossible.
'By appealing into the void, it could continue these WTO illegal export restrictions of nickel and is actually expanding them to other commodities,' Hopewell says. 'Other countries are now mimicking Indonesia and introducing similar bans on mineral exports.'
Hopewell believes the moment for bold action has arrived. In a column for Politico this week, she argued the international community should consider expelling the United States from the World Trade Organization in order to revive its paralyzed Appellate Body.
'The stakes are really high, so it's worth considering more radical solutions,' she told Fortune.
That attitude, Hopewell says, is no accident. Trump has long sought to undermine the WTO in favor of bilateral deals, where the U.S. holds more leverage.
'Trump is pursuing a divide-and-conquer strategy,' she said. 'He knows the U.S. is strongest when it negotiates one-on-one.'
By agreeing to bilateral talks, she argues, foreign governments hoping to protect domestic industries are undermining themselves. 'They're playing right into Trump's hands.'
Contacted by Fortune, the WTO Secretariat said it does not comment on the conduct of member states. The White House declined to respond.
To many Americans, Trump's aggressive trade stance may appear cost-free. But the fallout has yet to reach consumers, in part because industries like autos stockpiled inventory ahead of new duties.
'It will take some time before the effects of the tariffs are felt in higher prices,' Hopewell said. 'But when that hits, it's going to be a profound economic shock for the U.S.'
This story was originally featured on Fortune.com
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Forbes
16 minutes ago
- Forbes
Britain's Ambassador Says Trump Will Be ‘One Of The Most Consequential Presidents In American History'
Donald Trump listens to Peter Mandelson's remarks on a trade deal between U.S. and U.K. in the Oval ... More Office of the White House on May 8, 2025. (AP Photo/Evan Vucci) Peter Mandelson, the U.K.'s ambassador to the U.S., hailed a major transatlantic trade deal for automobiles, while expressing effusive praise for President Donald Trump. Speaking to the Sunday Times, Mandelson pointed out that British autos are currently enjoying a 17.5% competitive advantage over vehicles made in the EU. And such a deal wouldn't have been possible if the U.K. had remained a part of the European Union. 'We lost many other things by leaving, but we get the chance to do this deal. So there's some positives,' the ambassador said. The U.K. reached a trade deal with the U.S. in May that saw tariffs reduced from 27.5% to 10% for the first 100,000 British autos imported each year. The baseline tariff of 10% remains in place for most other imports, and are likely 'here to stay,' Mandelson said in the interview, 'but there is plenty of scope in different sectors.' The two nations are continuing their negotiations over reducing steel tariffs, and Mandelson said he's also pushing for a technology deal. Mandelson's appointment as ambassador to the U.S. sparked concerns within the Trump administration over his past meetings with top-level figures in China and the client list of his consultancy, Global Counsel. He had also previously described the president as 'a danger to the world' in remarks that he later admitted were 'ill-judged and wrong.' Mandelson told the Sunday Times that Trump is a 'more nuanced figure than people appreciate.' 'Look, he's not only a unique politician–he's also going to be one of the most consequential presidents in American history,' the ambassador said. 'He has this sense of history, this grasp of power which I think perhaps recent inhabitants of the White House haven't quite seen. 'He is not a man for endless seminars and thinking. He's not a victim of analysis paralysis. He has a very quick, easy way of grasping the core points about an issue. And let's be honest: more often than not, there's a kernel of truth in everything he says.' Mandelson pointed to Trump's crackdown on immigration as an illustration of this. "If you take immigration, for example, people feel that the work of ICE [Immigration and Customs Enforcement]"Allowing anyone from anywhere in the world to fly in and simply pass into the United States—and fan out across the country without any control or management! The public wouldn't stand it." And Mandelson can see similarities between Trump's efforts and those of the current Labour government. In May, Prime Minister Keir Starmer announced plans to to 'take back control of our borders and close the book on a squalid chapter' of rising inward migration. He outlined how the government plans to introduce restrictions across all forms of visas to stem the flow of people entering the U.K. In February, the U.S. president accepted an invitation from King Charles for an unprecedented second state visit to the U.K., becoming the first American president to be granted such an honor. Many pundits regarded the invitation as a savvy move by London aimed at renewing the 'special relationship' between the U.K. and the U.S., which Mandelson described as an 'economic lifeline built on flows of trade and investment.' Having arrived in Washington six months ago, Mandelson replaced career-diplomat Karen Pierce, who was known as the "Trump whisperer" for building close ties to the president. Mandelson, a former cabinet minister and Brussels commissioner, said the warm greeting the president gave to him when he first entered the Oval Office was the turning point in his efforts to engage with the Trump administration. 'I've never been in a town or a political system that is so dominated by one individual,' he said. 'Usually, you're entering an ecosystem rather than the world of one personality. But he is a phenomenon. A unique politician.'
CNBC
19 minutes ago
- CNBC
How we must divorce our personal politics from our investment decisions
The following is the prepared text from Jim Cramer's address to members of the CNBC Investing Club at Friday's third annual meeting from the New York Stock Exchange. It's time to do something that so many are loath to do, and to do it here because you deserve the truth. The vast majority of my friends, both in and out of business, refuse to allow even a sentence uttered, maybe not even a word, that is positive about President Donald Trump. I get that. There are myriad reasons to dislike the man. I know from my time as a judge on "The Apprentice," he is so very changed. Gone is the droll sense of humor. Vanquished is the notion of civility. There's nothing to like here, at least if you were at all brought up the way I was, where I could expect my mom to break out the bar of Ivory soap and shove it in my mouth, to express her disgust at my name-calling. But I have to admit that when it comes to the stock market, Trump is either the luckiest president in the world or he has somehow unleashed the animal spirits among individual investors that is driving stock prices higher. Think about it. For months now, we have witnessed more institutional selling pressure than any other time since 2008. During that same period, we have seen more individual buying power, and it has overwhelmed the institutional selling, something I find hard to fathom. Still, it's happening. That's what matters. Now in an earlier, more tortured draft of this speech, I tried to justify actions the president has taken as reasons for the market's resiliency. Perhaps, for example, Trump, despite his capricious lack of certainty, despite his boldfaced meanness, has an economic ethos that's working? Maybe there is a method to his madness that traditional Wall Street is missing? Maybe he is creating an environment that begets higher prices? Yes, at the agency level, for certain. But, frankly, other than in the business giveaways in the "Big Beautiful Bill," it's difficult to align the president's views with qualities that define a traditional bull market. So as an intellectual compromise, because we know that stock prices are rising, I have come up with this view: The president may be destructive in how he approaches his agenda, or any agenda, but he can be viewed as constructive when it comes to our investments because for the first time since I have been in this business, we are rallying on the backs of individual investors putting their money to work even if, as many professional money managers believe, stocks should be headed down, not up. The pros believe we should be in a bear market; but we are very much in a bull market. The individuals are putting money to work furiously, in individual stocks, demonstrating faith not in Trump, but in business, and it is being requited and will continue to be requited with higher stock prices. What do the individuals know, or see, that the institutions don't? Perhaps they are far less worried about traditional orthodoxy than the professionals? Maybe they don't think that tariffs are all that harmful, even as we know, historically, they have been, at least if taken to ridiculously high levels; and we are certainly bordering if not exceeding those. Or perhaps individuals are quite taken by the contrast between the previous president who was considered incredibly anti-business, and this man who is so comfortable in the CEO world? It could be that, although it is always worth remembering that stocks did incredibly well under old Joe Biden. Maybe these individual buyers believe that our country has been abused and taken advantage of by our so-called trading partners, and they cheer his moves against allies like Canada or Brazil or Vietnam or Mexico by buying stocks? There, let's call it, affectionate buying of stocks, coupled with forces in the business world that are so positive for stocks, may be the real reasons behind this rally's staying power. So, in the time we have, let's do this. Let's at least attempt to justify these gains in light of the White House's views and discern how much is policy and how much might be just plain luck. Tariff impact Let's go first to what Trump seems genuinely obsessed about even to the blinding of his own judgment: tariffs. We all presume they are inflationary. Federal Reserve Chairman Jerome Powell has said that many a time. And, it is true that, short-term they are almost always inflationary. But not in the longer term. Longer term they almost always cause companies to do what we did when we fell victim to tariffs from other countries in the 1980s and 1990s. When we were shut out by tariff, we built plants in the countries doing the tariffing and created jobs for them, while wiping out our jobs. We got almost no business in return. Now, because of Trump's tariffs and the vociferous way he espouses them, foreign companies will have to build in the U.S. Once they have built their plants, ensuring a steady supply of jobs, prices caused by the tariffs will come down. Meanwhile, as you shall hear, other prices will go down harder, obscuring the pain that tariffs herald. It is difficult to forecast how soon the foreign inspired industrial renaissance will take. But the idea that Fed interest rates have to stay high because we need to wait and see what happens is not a long-term prognosis. I think that tariff inflation will be contained and regarded as one-time, as temporary, and less embedded than people are thinking about right now. I do not believe we will have to wait much longer after the July Fed meeting to see rate cuts. No matter what, I am certain we will not have to wait until May 2026, when Powell's term is up, for short rates to hit 3% and change. (The current level of the fed funds overnight bank lending rate is 4.25% to 4.50%). More important, as long as rate cuts are in front of us, we stand to make good money in the stock market. That's been a given in history. Am I minimizing the pernicious impact of tariffs? We import about 15% of our gross domestic product. So, tariffs can't derail this economy, something that is often forgotten about. Our economy is too big. Tariffs can impact food and beverage prices and that will be a negative, and they will hit the CPI (consumer price index) even as soon as next Tuesday. However, there are other forces that we must examine, that can explain why this tariff intensity, some would say, insanity, with its obvious inflationary bent, hasn't caused the bear market in stocks that so many professionals keep insisting it must happen. At the heart of the individual bullishness that has smashed so much orthodoxy, is the spring's bounce back from Liberation Day (when Trump announced "reciprocal" tariffs on April 2) and Armageddon week, which was nothing short of miraculous and does not get talked about enough. Why did the bounce back rally occur? One reason is that the president got quiet. He let Treasury Secretary Scott Bessent do the talking and the talking was soothing and smart. Unemotional. Bessent played a big role in creating a bottom. He is a pleasant surprise, a wise rudder in a pretty stormy time. Artificial intelligence But a bigger reason may be the prospective deflation the market smells that is caused by artificial intelligence. It's noteworthy for us in his room that Club name Nvidia crossed the $4 trillion market cap mark. I hope you made money with us. The rise of Nvidia is more than just a story of the ascendance of semiconductors over all other sectors. I think Nvidia's supremacy is a sign, a symbol for an industrial revolution happening right now, that is going to be incredibly deflationary, well in excess of any inflation caused by Trump's tariffs, and it is incredibly bullish. Generative AI, the kind powered by Nvidia, is pervading every business and will lead to lower prices for many goods and services not by 2030 and not by 2029, but by next year. I think there is an acceptance that the president's laissez faire attitude toward generative AI is leading to incredible benefits for business and, most importantly, for profits. By this point in the process, I think our previous president might have tried to call a halt to Gen AI to try to figure it out. Instead, this president is an accelerant. The computers will begin to shrink white collar labor forces. Humanoids will do the same to blue collar jobs. Whereas we once feared inflation caused by a declining birthrate and a lack of immigrants to do the work others won't do, we can now see lower wages and plenty of workers trying to take them. Think of it like this microcosm: Club name Amazon's commitment to robots is rather incredible. As is FedEx's. The new factories and distribution centers they have do not employ many people. These are places that used to employ tens of thousands of expensive people who had bountiful benefits. The biggest warehouses in Amazon's system are in Shreveport, Louisiana and in Massachusetts. They require almost no people. Same with the giant FedEx depot in Boston where robots do the unloading. These robots cost $60,000 and do not get hurt and do not require health insurance or incentives. These are the kinds of jobs that we would have had to have a huge amount of immigration to fill. But they are not necessary. So, labor costs will be coming down while immigration ceases to be a factor. I don't know a soul who saw that coming even two years ago. It's the definition of deflation and deflation will hold inflation down despite Trump's tariffs. It might even keep the price of U.S. government debt down, as any increase in the amount of bonds that need to be sold may be met with buying from those who do not fear inflation. Again, that's incredibly bullish. Similarly, the white-collar jobs lost will cause downward wage pressure on all sorts of professions. Right now, I am working to book a private company on "Mad Money" called Harvey AI, which has a program that will take care of a gigantic percentage of what law firm associates currently do. Armed with Nvidia's most current chips, Harvey AI can reason at a level that we might have expected from a third- or fourth-year associate. This is not a "free up people for important work," story. It is about how law firms, three years from now, will not have to hire many new people. Similarly accounting firms, chronically short staffed, will no longer need to recruit much at all. The machines can do a better job. And advertising? There will only be five channels of any importance: Instagram (owned by Club name Meta Platforms, Amazon, Alphabet's YouTube, Google, and TikTok; and you do not need ad firms to place ads with them. The costs of reaching people are plummeting and the percentage of the right people reached is dramatically elevated as long as you do not use people and do use their machines. AI will end up reducing friction that is a pure deadweight cost in every one of those highly paid professions. The changes are happening now, and the Trump stock market will be the lucky beneficiary. Let's just consider some other wonders of the AI world that I have seen that I think will be commonplace in five years. Right now, at the Stanford Robotics Center there are robots that are able to clean a hospital or hotel room including making beds and picking up dirty clothes. I saw them do it. These robots should be mass produced in three years' time. I have seen robots from IX Technologies, a Norwegian company, powered by Nvidia technology, that are capable of doing pretty much every household chore, from folding laundry and vacuuming to making you a cup of tea. I think these are the kinds of robots Amazon CEO Andy Jassy said would be for sale from Amazon within the next four years. The prototypes are ready now; they just have not yet been mass produced yet. The demand for these kinds of robots will be extraordinary. It gives me total faith that costs are about to come down for many of the more service-oriented professions. Let's not rule out the sudden embrace of self-driving cars. Last night, (Thursday night on "Mad Money") we showed data that reveals a level of acceptance of Waymo over the last year that could bring about deflationary change in ride sharing that was inconceivable two years ago. What I have mentioned so far is simply the luck of Trump. He's not playing a role in much of what I described other than letting it happen unimpeded. Dealmaking Let me tell you what he is doing, though, behind the scenes, that is incredibly powerful when it comes to stocks: his changing of the guard through the federal agencies. One of the things I learned when I was in the boring hell that was law school was the power of the administrative agencies of the federal government. We see a lot of high profile actions by the president that institutions don't like, but the real dirty work of any regime is at the agency level, and that level is the most pro-capitalist I can ever recall. Consider these changes. We are beginning to see the fruits of an Federal Trade Commission and a Justice Department that don't really care about concentration of power when it comes to deals. The impact is amazing. The fact that the government is turning a blind eye to Charter, a cable company, buying another cable company, Cox in a $34 billion deal, or that this spring Club name Capital One was allowed to close on its buy of Discover, or that this very Friday morning, we learned that T-Mobile will be allowed to acquire substantially all of US Cellular's wireless business after T-Mobile scrapped its DEI program, is just extraordinary. I think at the very end the Biden administration would have chosen to block anything cable or cellular because of concentration, and it would have never let two subprime entities merge. To me, these are harbingers of what's to come; I just can't see this administration blocking anything but the most highly anti-competitive of deals and that may be the single most positive thing that can happen for the market. Deals shrink the supply of stock. They embolden other deals. They create tremendous wealth. And, we have been devoid of them under the previous regime. For years, for example, major pharma bought minor pharma. Under Biden, this kind of transaction ground to a halt. This past week, Merck bought Verona Pharma for $10 billion. I do not expect much scrutiny at all because there's nothing anti-competitive about this deal. But I think the Biden FTC would have found a reason, or made up a reason, to try to block it as it did to so many pharma deals in the past four years. If you allow these kinds of transactions the ever-shrinking price to earnings multiples of pharma will reverse and the sector away from Club name Eli Lilly could become investible again. Deregulation The agencies in charge of banks did everything they could to stack the deck against them. The agencies required thousands of people to be hired to comply with anything that they came up with, no matter how draconian, and here I am talking about the Consumer Financial Protection Bureau, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. Again, the regulators crushed the P/E multiples of the banks. The P/Es are now coming back as the banks have been able to shed many of these deadweight internal compliance people, and the government changed the stress tests to make them easier and more realistic. I can see their 14 times multiples go to a 16 or even 17, which is a good reason why we are going against the wisdom of Wall Street and keeping our banks despite their dramatic gains. The agencies are now working actually working for private industry to increase profits. Consider the Federal Energy Regulatory Commission. It is trying to fast-track any pipeline expansion — most had high hurdle rates — that will allow our natural gas abundance to be used at far greater distances. Why is this so important? Because right now the only way we will be able to add to our 13.5 million barrels a day of oil that we currently produce is if we can move the natural gas byproduct out of the Permian. The pollution from flaring is too horrible even for this administration. Additional pipe will allow that to happen including export pipe that the Biden administration chose to block. The increase in the amount of oil and gas being pumped should lead to continued downward pressure on the price of all fuels, another force of deflation to counter the tariffs. Let's not forget. I think we have seen the end of the hectoring of the hyperscalers. The days when agencies would just sue them for the sake of making their lives miserable are over. The days when foreign countries are allowed to use our tech companies as honeypots may be over, too, if Trump gets his way. Do not underestimate how important this change will be. The CEOs of these companies lived in fear and angst every day because of the governments around the world. Whenever you talked to them offline, you sensed that they expected a subpoena during your interviews. Those days are over. Big Beautiful Bill The last reason why the individuals may be right and the institutions wrong, is the Big Beautiful Bill just signed into law. It will produce a firehose of economic activity that will create a huge amount of profits that will feed right into the stock market. The big ones: Immediate expensing for capital investments. That will produce a huge windfall in profits that will be plowed back to shareholders in the form of higher dividends and bigger buybacks. Businesses can deduct the cost of new investments including manufacturing facilities immediately instead of depreciating them overtime. This change, which we have seen periodically, has historically produced an explosion of manufacturing to occur. There will be immediate deduction of research and development, which sounds like a snoozer but historically has brought about a gigantic geyser of money toward the creation of new products, which need lots of equipment to test and build. So positive. There's a new and dramatic increase in deduction of business interest. That will spur the buying of all sorts of new equipment. Many of these breaks will be applied retroactively. When these kinds of changes were used before it led to dramatic increases in profit and an increase in profits means an increase in stock prices. What do all of these mean for our portfolios? We have done our best to stay invested in the best of the tech companies, which will benefit from the Big Beautiful Bill more than most companies and from their own internal actions that we speak about so often. We can also expect a huge premium to be put on cyclical growth stocks like GE Vernova, of which we must buy more, or Eaton, Dover, Honeywell, Linde and Dupont. The banks could have several years where they put up excellent numbers. You will hear us speak more about these stocks as the meeting goes on. Bottom line I think in the end, we are seeing a wholesale revolution in favor of employment, business expansion and profits. All three are remarkably positive for stocks and I believe that Trump will, despite his tariff obsession, continue to press for more jobs, greater expansion and bigger profits. He will do it so snarly and ham-handedly, though, that he will obscure his own success and the success that generative AI is giving him. I think he is going about things so negatively and so darkly, that no firm on Wall Street will come out and say it. It will be whispered but never spoken aloud lest too many clients will be alienated. Maybe here's the best way to put it: Even if you hate Donald J. Trump you are going to pay more for our stocks as this presidency goes on. The easy downgrades, the institutions who flit out and can't get back in, the deals that do get done easily, the IPOs of good companieslike an MNTN or a Hinge Health, are starting to work, to make you money. These are the stuff of a bull market the likes of which could make it so we will have to buy every dip, including the ones he creates with his loutishness and impetuous behavior. Do I wish it were done in a more admirable fashion? Do I wish he'd stop his darned postings and rants? Yes. Can he still derail things? Absolutely, if he spends the next three years doing nothing but raising tariffs instead of governing. Or if he appoints a Fed chief while he already has one. Or, if he just decides that there's no amount of spending that is too much for our country. Anyone of these is possible. He just can't seem to help himself. He's a living reminder, perhaps, as I write at the end of "Confessions of a Street Addict," it is better to be lucky than good. But here's something I learned a long time ago when I came to Wall Street. When you go to the bank to cash in your stock market winnings, here's something they don't ask you. "Did you vote for President Trump? If you didn't, you are not allowed to make money." That, ladies and gentlemen, however happy or sad you may be at the turn of events in Washington, is for me, in this room, what really matters. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Newsweek
20 minutes ago
- Newsweek
Germany Seeks Trump Tariff Agreement Extension as Deadline Looms
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. German Chancellor Friedrich Merz announced on Sunday that he is working intensively with European leaders to prevent the implementation of threatened 30 percent U.S. tariffs on European Union (EU) imports set to begin August 1. Newsweek reached out to the White House via email on Sunday for comment. Why It Matters The potential 30 percent tariff represents a significant escalation from previous negotiations, where the EU had been preparing for a 10 percent baseline tariff as recently as July 7. Merz acknowledged that "the German economy would be hit hard by the tariffs," highlighting the stakes for Europe's largest economy. The situation reflects broader challenges in transatlantic trade relations as President Donald Trump has regularly cited a goods trade deficit of about $236 billion in 2024 while pushing Europe to buy more American cars, energy, and defense equipment. What To Know Merz told German broadcaster ARD he had discussed the matter "intensively over the weekend with both [French President Emmanuel] Macron and [President of the European Commission] Ursula von der Leyen," and had also spoken directly with Trump. The chancellor emphasized his commitment to finding a solution within the remaining two-and-half weeks before the deadline. The current crisis stems from weeks of failed negotiations between the U.S. and its major trading partners. Trump threatened to impose the 30 percent tariff starting August 1, after comprehensive trade deal negotiations collapsed. This represents a dramatic escalation from the EU's previous goal of striking a trade deal with a 10 percent baseline tariff by July 9. The EU had been preparing for multiple scenarios, with European Commission spokesperson Olof Gill previously confirming to Newsweek they were "still aiming for a July 9 agreement in principle." However, negotiations have deteriorated since then. The EU has retaliatory measures targeting $22.6 billion in U.S. goods already approved, with another package covering $102.2 billion ready to activate if necessary. During meetings in Washington last week, EU Trade Commissioner Maroš Šefčovič received "the first draft of the (U.S.) proposals for the eventual agreement in principle," though one diplomat described it as offering "nothing very concrete." Treasury Secretary Scott Bessent had indicated Trump would be "sending letters to some of our trading partners saying that if you don't move things along, then on August 1 you will boomerang back to your April 2 tariff level." Internal EU divisions have complicated negotiations, with Germany and Italy favoring quick acceptance of deals while France and Ireland urge a harder line. The situation remains volatile, as Trump demonstrated by abruptly cutting off similar negotiations with Canada last week over a digital services tax dispute. What People Are Saying President Donald Trump posted separate letters on Truth Social on Friday to Mexican President Claudia Sheinbaum Pardo as well as von der Leyen informing them of the tariff rates: "We have had years to discuss our Trading Relationship with The European Union, and have concluded that we must move away from these long-term, large, and persistent Trade Deficits, engendered by your Tariff, and Non-Tariff, Policies and Trade Barriers." European Commission President Ursula von der Leyen's X message on Saturday: "A 30% tariff on EU exports would hurt businesses, consumers and patients on both sides of the Atlantic. We will continue working towards an agreement by August 1." She added: "At the same time, we are ready to safeguard EU interests on the basis of proportionate countermeasures." German Chancellor Friedrich Merz told German broadcaster ARD on Sunday: "We want to use this time now, the two and half weeks until August 1 to find a solution. I am really committed to this." European Commission spokesperson Olof Gill told reporters last week: "Nothing you are seeing in terms of our approach to trade is haphazard. This has been war-gamed long before the election took place. And I think you can see that that's really playing out in real time." Germany's Chancellor Friedrich Merz speaks with President Donald Trump before the start of the North Atlantic Council plenary meeting at the North Atlantic Treaty Organization (NATO) summit in The Hague on June 25. Germany's Chancellor Friedrich Merz speaks with President Donald Trump before the start of the North Atlantic Council plenary meeting at the North Atlantic Treaty Organization (NATO) summit in The Hague on June 25. LUDOVIC MARIN/POOL/AFP via Getty Images What Happens Next The immediate focus centers on the August 1 deadline, with European leaders racing to secure either an extension or a framework agreement. When asked about potential counter-tariffs as proposed by France, Merz indicated support but emphasized timing: "Yes, but not before August 1." The EU has prepared for diplomatic success and failure, having already positioned retaliatory measures while continuing to pursue negotiations. The outcome of Šefčovič's Washington visit is expected to be discussed by EU ambassadors and the EU Council's Trade Policy Committee this week.
