Trump Reignites Trade War with EU as he Threatens 50% Tariffs on the Bloc
On Friday 23rd May, President Trump threatened to impose a 50% tariff on June 1st, 2025, on the EU (European Union) stating that current negotiations on trade between Washington and Brussels were going nowhere. President Trump has been complaining for a long time that the EU bloc has been unlawfully targeting U.S. companies with regulations and lawsuits, plus he feels that the Europeans have been deliberately taking their time over the current trade negotiations. Originally, on “Liberation Day” 2nd April 2025, the EU had been marked down for 20% tariffs, but were reduced to 10% until July 9th, to give enough time for trade talks to find common ground and a solution.
In response to the tariff threats by President Trump, the EU Trade Commissioner, Maroš Šefčovič, said “EU/US trade is unmatched and must be guided by mutual respect, not threats. We stand ready to defend our interests”. He went on to stress “the EU’s fully engaged, committed to securing a deal that works for both of us”. Many of the European governments reacted to the tariff threat warning that higher tariffs would indeed be damaging to both sides. Meanwhile, back in the Oval Office, President Trump also announced to reporters that new tariffs would be imposed unless EU companies moved their operations to the United States.
However, on Monday 27th May, following a phone call between the President of the European Commission Ursula von der Leyen and Donald Trump, where the EU signalled a more conciliatory approach by agreeing to accelerate trade talks, the President of the United States agreed to extend the 50% tariff deadline to July 9th, 2025. Experts suggest that one of the major roadblocks that face the EU is that they feel America is not making it clear exactly what they want, and they still do not know who is speaking for the President. EU Trade Commissioner Maros Sefcovic has spoken twice with U.S. Commerce Secretary with his statements adopting a more malleable tone, gone was the previous rhetoric of “we will defend our interest rates”.
After Trump’s announcement last Friday, the markets reacted with the usual predictability with the Nasdaq down 1%, the broader S%P 500 down 0.68%, the STOXX EUROPE 600 index down 0.68%, Germany’s Dax and France’s Cac 40 both ended the day down over 1.5%. The US Dollar took a beating again, down by as much as 0.8% on the Bloomberg Dollar Spot Index*, slumping to its lowest level since 2023. Experts suggest that the threat of punitive tariffs then removing that threat gives many investors and traders in the financial markets a lack of confidence in the Presidency translating to a lack of confidence in the greenback. Whilst many indexes recovered on Monday 26th May, the US Dollar continued its decline which not only included the slap happy way tariffs are doled out, but also Trump’s tax bill which is expected to add hundreds of billions to the federal deficit. Meanwhile data released from the Commodities Futures Trading Commission show hedge funds, asset managers and other speculative traders continued to bet against the US Dollar.
*Bloomberg Dollar Spot Index – This index is a benchmark that tracks the performance of the US Dollar against a basket of major global currencies. It’s designed to provide a
comprehensive view of the dollar’s strength by including currencies from both developed and emerging markets that are significant in international trade and liquidity.
A full-blown trade war between the EU and the United States is according to experts not in anyone’s interests. The repercussions to both protagonists’ economies would be negative and will undoubtedly have a downside effect on global trade as well. No matter what is currently being said, both the U.S. and the E.U. are miles apart in their negotiations, with President Trump having already rebuffed a trade deal from the E.U. last Thursday 22nd May. Despite improved rhetoric from both sides those close to the negotiations are fearful that come July 9th, 2025, a consensus may not have been reached.
