As trade tensions continue to boil over, U.S. President Donald Trump is travelling to Scotland. This week he will meet with European Commission President Ursula von der Leyen to hash out a possible resolution to the seemingly endless trade disputes. These negotiations come at a critical juncture. A deadline of July 25 approaches, but before then an agreement would avoid a potentially costly transatlantic trade war. As a reminder, this includes Trump’s recent announcement of tariffs on cars, car parts, steel, and aluminum. These announcements are the latest escalation in an ugly trade spat between the U.S. and the European Union.
Trump’s administration has imposed a 25 percent tariff on automobiles and car parts, along with 50 percent levies on steel and aluminum imports. In response, the European Union moved quickly and readied their own retaliatory package. This retaliatory package specifically focuses on $109 billion in U.S. exports, from auto parts to bourbon. The stakes could not be higher at this pivotal moment. To add insult to injury, in case negotiations fail, Trump is threatening a 30 percent tariff on EU products that would trigger even higher tariffs.
Trade Disputes Escalate
The trade conflict has reached a fever pitch with Trump’s accusations that the European Union has been swindling the United States. And just as importantly, he is actively looking for ways to reduce the EU’s massive goods trade surplus with the U.S. Last year, this surplus ballooned to approximately $370 billion in exports, across industries including fuel, medical drugs, machinery, and aircraft.
“Well, I don’t want to tell you what the sticking points are,” Trump remarked, hinting at the complex nature of the negotiations ahead. Right now, the U.S. imposes a uniform 10 percent tax across the board on all EU goods. On top of that, there are targeted tariffs on specific products. European negotiators are continuing to push for a compromise. They are proposing to bring the tariff rate down to a simple average of 15 percent.
Maros Sefcovic of Slovakia, his is the key role in the EU’s negotiators. He underscored the importance of defensive tools to protect the EU economy and a strong emphasis on rebalancing trade relations as well. He stated, “We have to protect the EU economy, and we need to go for these rebalancing measures.” This is emblematic of the EU’s desire to protect its economic interests in an era of increasing geopolitics.
Economic Ramifications
Economists warn that if Trump follows through with his threat of a 30 percent tariff on EU goods, the impact could be severe. According to economics consultancy Oxford Economics, the move would send the 27-member European Union “to the brink of recession.” That potential fallout is what makes the upcoming discussions between Trump and von der Leyen so urgent.
As both leaders move towards their meeting, they should be mindful of the need to find mutually beneficial arrangements before the situation gets worse. Helsinki is the latest sign that transatlantic relations are under severe strain. At the same time, the international economic order is threatened as countries scramble to mitigate the effects of trade warfare.
Looking Ahead
The meeting, taking place in Scotland, will be crucial in deciding the direction of U.S.-EU trade relations going forward. Trump has acknowledged von der Leyen’s reputation, calling her a “highly respected woman,” which may signal a willingness to engage constructively in talks. On the ground, both sides are wary of what’s possible in the short window of time left.
Lars Lokke Rasmussen’s quote encapsulates the current atmosphere: “If you want peace, you have to prepare for war.” Negotiators are already preparing for some pretty heated arguing. These negotiations have the potential to greatly influence economic policy on both sides of the Atlantic.
