EU Stands Firm in US Trade Talks, Aims to Avoid 20% Tariffs

The European Union has adopted a confident stance in its negotiations with the United States, emphasizing its status as a major economic power and indicating that it is not in a rush to reach a deal. This position comes as the U.S. Treasury Secretary, Janet Yellen, highlighted that Switzerland and the United Kingdom have made significant progress in their trade negotiations with the U.S., while the EU's progress has been slower.

Senior EU officials have expressed that the EU, being one of the world's top three economies, is confident in its negotiating power and aims to secure a better deal with Washington than the one reached with the UK. The EU is particularly concerned about avoiding a doubling of "reciprocal" tariffs in July, which could escalate into a full-blown transatlantic trade war, impacting a 170 billion dollar trade relationship.

Maros Sefcovic, the EU's trade chief, stated, "We do not feel weak. We do not feel under undue pressure to accept an unfair deal." This statement was made before Yellen's comments in Geneva, where significant trade agreements had already been reached between the U.S. and China, easing global trade tensions. Despite this, the EU's stance remains unchanged.

Poland's Deputy Minister of Economy, Pawel Baranowski, recently noted that while negotiations between the EU and the U.S. are accelerating, the EU prioritizes reaching a good deal over a quick one. The U.S. had initially imposed tariffs on European industries such as automobiles, steel, and aluminum, but later reduced them to 10% for a 90-day period to facilitate negotiations. If negotiations fail within this period, additional "reciprocal" tariffs, totaling 20% for the EU, will be imposed.

Baranowski also mentioned positive signs from the U.S. side, indicating a willingness to ease tensions, which he sees as a good omen for accelerating negotiations. Sefcovic, in a press conference, described a "constructive" call with U.S. Commerce Secretary Gina Raimondo, stating that the goal is to address immediate challenges while laying the groundwork for deeper cooperation.

President Trump has also threatened further tariffs on pharmaceuticals, semiconductors, critical minerals, lumber, and trucks. EU trade officials, familiar with the negotiations, have expressed difficulty in understanding Trump's trade policy objectives. EU Commission President Ursula von der Leyen has not held a formal meeting with Trump since his re-election, only exchanging brief words at the Vatican during Pope Francis' funeral.

Von der Leyen's comments suggest that Europe is aiming for a more comprehensive trade agreement rather than a limited one that could quickly yield political gains, similar to the deal between Washington and London. The EU's stance is bolstered by the fact that EU-U.S. trade is over six times the size of U.S.-UK trade, giving the EU significant leverage in negotiations.

Lithuania's Finance Minister Rimantas Sadzius, during a break in an EU finance ministers' meeting, expressed skepticism about the EU needing to follow any specific model. Analysts suggest that the EU should be prepared for negotiations that go beyond trade, including reducing non-tariff barriers such as VAT and regulatory differences in automotive and food safety standards.

However, the EU's approach has been criticized for being too narrow, focusing only on the most basic trade issues without committing to reducing regulatory barriers. The U.S.-UK trade deal, for instance, did not address VAT, digital services tax, or food safety standards, which were points of contention for Washington.

Despite the challenges, the EU's strategy appears to be cautious and calculated. Christian Kohlpaintner, CEO of the German chemical company Brenntag, described the EU's handling of the negotiations as "very sensible," noting that the 90-day tariff pause provides a temporary respite but does not offer long-term clarity for the market.

Simon Evenett, a professor of geopolitics and strategy at the International Institute for Management Development, suggested that the U.S.-UK deal and the U.S.-China agreement indicate that a 10% general tariff and a 25% tariff on specific industries are the benchmarks for Trump's trade policy. The EU's approach, while cautious, aims to secure a deal that benefits its economic interests without compromising its principles.