Brussels gives ground as Donald Trump holds firm on 10% tariffs

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EU trade negotiators have acknowledged they are unlikely to overturn US President Donald Trump’s “reciprocal” tariffs, warning European capitals that deeper concessions will be needed to avert a full-blown trade war.

Despite optimism in markets over progress in US-EU talks, senior EU officials have privately painted a bleak picture of negotiations that may force the bloc to accept higher US duties for the long term.

The European Commission has told EU member states that Trump’s 10 per cent “reciprocal” tariff on almost all goods will probably stay, according to officials and diplomats, although negotiators still hope to reduce the rate.

The assessment marks a sharp change in Brussels’ approach to talks, which had differed from the UK in refusing to give Washington unilateral concessions simply to limit duties to a 10 per cent baseline.

With markets failing to moderate Trump’s tough trade policy as much as Brussels had hoped, the bloc has been left facing an unpalatable choice between making concessions or retaliation, according to officials and diplomats.

Following a call with European Commission president Ursula von der Leyen on Sunday, Trump postponed his threat to impose 50 per cent levies from June 1 to July 9.

Trump has imposed a 10 per cent additional tariff on most US trading partners, which hits about 70 per cent of EU exports, or €380bn. The US has insisted this 10 per cent rate is not part of trade negotiations.

Despite Trump’s willingness to delay the most punitive tariffs, Björn Seibert, chief of staff to von der Leyen, on Monday gave EU ambassadors a sombre assessment of the negotiations, according to people briefed on the meeting.

Taking account of the US position, Seibert mapped out a potential deal that has elements of the one concluded by the UK. He suggested the minimum required to reach an agreement may be lower-tariff or tariff-free quotas for sensitive exports such as cars, which are subject to 25 per cent duties imposed on national security grounds. Trump has threatened the same for semiconductors, medicines and other products.

“We have to try to do better than that,” said one EU diplomat. But they acknowledged that more ambitious goals would require the bloc to take countermeasures against the US.

“Trump doesn’t have the slightest interest in a negotiated solution. He wants us to capitulate or face punitive tariffs.”

France was the only country to speak up against unilateral concessions and the acceptance of a 10 per cent tariff, according to three diplomats. Several member states have previously held similar positions.

As part of its offer to the Washington, Brussels will also offer to deregulate, widening a recent drive to cut red tape for companies that can be pitched to Trump as a benefit for US business.

It was unclear whether Siebert intended to increase the scope of the EU’s plans for deregulation, or simply to present the existing measures in the trade negotiation, according to the diplomats.

The leaders of France and Germany have already called on the commission to repeal a supply chain directive that forces big businesses to account for emissions and labour practices among suppliers, a prime US bugbear.

A majority of member states want to scrap proposed new controls on goods that might have been produced on deforested land for “low-risk” countries, including the US.

Italy’s Prime Minister Giorgia Meloni, who has spoken out strongly against any tariffs, is playing a pivotal role in the talks. The nationalist politician spoke to Trump, a long time ally, to ask him to accept a call from von der Leyen over the weekend.

Rome still favours both sides eliminating tariffs on all industrial and some agricultural goods, but ambassadors were told the US was not interested. Instead, officials said, the EU could cut some import tariffs unilaterally.  

Other US demands include scrapping digital taxes and value added tax and changing food standards to allow more American produce.

Siebert made clear the EU should be prepared to take countermeasures if talks fail. The EU has during negotiations paused a €21bn package of up to 50 per cent tariffs on US goods such as maize, wheat, motorcycles and clothing. These were designed to retaliate against Trump’s steel tariffs.

The commission is also consulting member states on a €95bn list of other items, including Boeing aircraft, cars and bourbon whiskey, which would be hit in response to Trump’s “reciprocal” duties.

Some member states advocate taking a more uncompromising approach, arguing it is possible to shift Trump. “It’s not politically feasible to settle for 10 per cent tariffs without taking any measures ourselves. Businesses and citizens would not accept it,” said a second EU diplomat.

A Eurobarometer poll for the commission on Wednesday found 80 per cent of EU citizens backed retaliation if other countries increased their duties on imports from the bloc in order to defend its interests.