On Saturday, Trump announced in a letter to European Commission President Ursula von der Leyen that a 30% tax increase on EU imports would take effect starting 1 August. EU ministers are now meeting in Brussels on Monday to agree on an appropriate response.
Even before the announcement, EU Trade Commissioner Maroš Šefčovič warned that imposing 30% tariffs on EU products would effectively end transatlantic trade as we know it. He is expected to meet his American counterpart on Monday in a bid to negotiate a solution.
With total trade between the US and EU reaching €1.7 billion in 2024,both sides remain heavily dependent on each other, as each other’s most important trading partners. It remains to be seen whether all EU member states support negotiations beyond 1 August. Over the weekend, Germany – as a major exporting country – advocated for continued dialogue, while Austria and France argued for more pressure on the US.
Technically, the EU could respond immediately with retaliatory tariffs, but so far, member states have refrained from doing so in order to keep negotiations alive until 1 August. After months of talks, the EU was close to a joint agreement that would accept some level of tariff increase – but capped at no more than 10%.
Optimists interpret Trump’s announcement as a tactic to increase leverage in the ongoing negotiations. In its statement, the US administration suggested that it might drop the planned tariffs entirely if the EU fully opened its markets to American goods. One key issue appears to be liquefied petroleum gas (LPG): Trump has previously hinted at reducing tariffs in exchange for higher EU imports of American LPG.
If the EU were to impose counter-tariffs, the US has threatened to pile additional tariffs on top of the announced 30%. For now, the EU prefers to avoid escalation. European markets have already reacted negatively to Trump’s announcement, and there are also concerns over defense dependencies, with EU leaders wary of provoking renewed US doubts about NATO commitments.
President Trump’s goal is to reduce the US trade deficit, which stands at around $1.29 trillion. A high trade deficit suggests that domestic production is not competitive enough to meet demand, forcing the US to import more goods. Observers also note that Trump is looking to raise revenue to help fund his promised tax cuts.
Trump argues that the exporting countries – such as EU member states – will bear the cost of the additional tariffs. However, there is a risk that US consumers will also end up paying higher prices, potentially harming the US economy further.
