Trump announced that he’s raising EU auto tariffs to 25% from 15% “next week” in a surprise move.
“I am pleased to announce that, based on the fact the European Union is not complying with our fully agreed to Trade Deal, next week I will be increasing Tariffs charged to the European Union for Cars and Trucks coming into the United States. The Tariff will be increased to 25%. It is fully understood and agreed that, if they produce Cars and Trucks in U.S.A. Plants, there will be NO TARIFF. Many Automobile and Truck Plants are currently under construction, with over 100 Billion Dollars being invested, A RECORD in the History of Car and Truck Manufacturing. These Plants, staffed with American Workers, will be opening soon — There has never been anything like what is happening in America today! Thank you for your attention to this matter. President DONALD J. TRUMP”
This could turn out to be a big tactical mistake and an opportunity for the EU if it embraces it.
The big surprise to me last year was how quickly the EU folded under tariff pressure for the US. It was the one part of the world with the economic clout and size to fight back against tariffs but it utterly folded.
That’s turned into a political liability. Just this week, Sabine Weyand, the Director-General for Trade at the European Commission was shuffled out of her position.
The deal was called the “Turnberry Deal” (or the EU–US tariff framework) and she Weyand famously described the process as a strategic “stabilization”
effort.
As we can see, it hasn’t led to any kind of stabiliization or predictability. She also said it was done to preserve NATO and US help in Ukraine but both of those are in dire straits as well.
It’s also no surprise that this moves came after German Chancellor Merz struck a chord with Trump saying:
“An entire nation is being humiliated by the Iranian leadership,
especially by these so-called Revolutionary Guards. And so I hope that
this ends as quickly as possible”
Since then Trump has been lambasting him and now we get this. I have to wonder if this is exactly what Merz wanted.
So what’s the opportunity here?
The EU can take this as a reset. They have a new negotiator and Trump is proving that deals with him are worthless.
Canada’s Mark Carney said this week that some countries were regretting making deals.
“A lot of countries rushed into deals with the US. They weren’t really
worth the paper they were written on,” Carney said in an interview.
Surely one of those places is the EU and Trump just gave them an opportunity for a re-do. It would take some pain but if the EU decides to escalate now, they’re likely to get a better long run deal, or at least establish some credibility.
