Responding to Trump’s ‘gun to the head’ trade tactics

President Trump’s trade policy has been described as erratic. Frenzied is another word that fits. While Donald Trump has been a long-term devotee of tariffs, the only constant in his approach since he returned to office has been his inconsistency. Forbes Magazine calculated that in less than four months the US President has ‘flip-flopped’ 28 times on his tariff policies. The question facing the EU is how to deal with the erratic leader of its most important ally.

Liberation Day

On “Liberation Day”, 2 April, just 10 weeks after moving back into the White House, President Trump announced a baseline 10% tariff on imports from all countries plus variable ‘reciprocal tariffs’ reflecting the extent to which each country was, in President Trump’s view, ‘taking advantage’ of the US.

A week later President Trump announced that the new tariffs, except for a 10% base rate tariff, would be paused until 9 July allowing 90 days to negotiate trade deals. The Trump administration aimed to conclude “90 deals in 90 days”. On 7 July this ‘pause’ was extended to 1 August, a date which President Trump later argued was always the intended date for the ‘pause’ to end and new tariffs to commence.

To date three ‘deals’ have been ‘achieved’, the “US-UK Economic Prosperity Deal (EPD) signed off in June, an agreement with Vietnam announced on 2 July, details of which remain sketchy and an agreement with Indonesia which would see proposed US tariffs of 32% come down to 19% in exchange for US firms being guaranteed “full access” to the Indonesian market that has been reported more recently. Again, details remain sketchy.

Bad news in the post

Overlooking the fact that it takes two to ‘reach an agreement’, President Trump, on 7 July announced that countries who had not concluded agreements with the US would shortly receive letters setting out the tariff levels to which their exports to the US would be subject. Those letters started to roll out immediately.

On 11 July Trump issued his letter to the EU Commission President. The curiously worded letter, ignores the fact that EU-US negotiations had been underway for weeks, characterizes the correspondence as demonstrating “ the strength and commitment of our Trading Relationship and the fact that the United States of America has agreed to continue working with The European Union, despite having one of our largest trade deficits with you.”

The letter announced that “starting on 1 August 2025 we will charge the European Union a Tariff of only 30% on EU products sent into the United States, separate from all sectoral tariffs.” It continues “please understand that 30% number is far less than what is needed to eliminate the trade deficit disparity we have with the EU”. It reminds the reader, “as you are aware, there will be no tariff if The European Union or companies within the EU decide to build or manufacture product within the United States —”

In addition, the letter requires that “the European Union will allow complete open Market Access to the United States”, a stipulation that, if applied fully, would require the EU to lift its rules that prohibit hormone treated beef, chlorinated chicken and genetically modified crops. It warns “If for any reason you decide to raise your tariffs and retaliate, then, whatever the number you choose to raise them by, will be added onto the 30% that we charge.”

The letter ends – “if you wish to open your heretofore closed trading markets to the United states, and eliminate your tariff and non-tariff policies and trade barriers we will perhaps consider an adjustment to this letter these tariffs may be modified upwards or downwards depending on our relationship with your country you will never be disappointed with the United States of America”.

The President’s missive came as an unpleasant surprise. Commission officials are reported as believing that the EU was not on the US President’s ‘mailing list.’ Commissioner Sefcovic who headed the EU team in the negotiations that commenced following Trump’s “Liberation Day” announcement indicated frustration with the abrupt US about-face. Until moments before President Trump took to “Truth Social” to announce that a letter to the EU was “in the post” the Commissioner believed that the US and the EU were “very close” to the point where an agreement could be initialled.

At the meeting of EU Trade Ministers on 14 July Sefcovic described the threat of 30% tariff’s as injecting a “totally different dynamic” into the situation, duties at that level would effectively end trade between the EU and the US.

The EU Council of Ministers labelled the 30% tariffs as both unjustified and unacceptable and committed to working on a negotiated outcome that would deliver “tariff relief and bring “stability and predictability” back to transatlantic trade.

Prior to the Council meeting, Commission President Ursula von der Leyen announced that application of the EU’s €21 billion retaliatory tariff package on US products, agreed by EU Ministers in April and which was due to come into operation on 15 July would be delayed until after 1 August. The decision – second delay in triggering the package – was “broadly supported” by the Council “in order to provide more room for negotiations”.

The meeting also signed off on a second retaliatory package involving tariffs of €72 billion. This will come into operation if talks fail. Demonstrating the challenges facing the EU going into any negotiations, the second retaliatory tariff package as proposed by the Commission covered €95 billion of goods ranging from aircraft, machinery, medical devices and plastics across the spectrum to agricultural products and bourbon whiskey. The package was cut back to €72 billion following pressure from Member States.

In addition to the two retaliatory tariff packages, the EU ‘toolbox’ also includes the EU Anti-Coercion Instrument (ACI). ACI, which has been operational since 2023, allows the EU to take measures to counter economic coercion by third countries.

Europe’s dilemma

While in a better position than many countries that received ‘letters’ from the White House last weekend, the EU faces some unique challenges.

The very nature of the EU poses a challenge: deciding policies and tactics requires consensus and is politically more complex and slower for the EU than it is for individual nations.

Another major problem, the impact of Trump’s tariffs and of any retaliatory measures the EU takes will not be evenly spread across the member states. US tariffs will hit the biggest EU exporters to the US, Germany, Ireland, Italy, France, Netherlands, Belgium and Spain worst. The impact on Ireland could be potentially ruinous. Impacts will also differ significantly from sector to sector.

There are also vulnerabilities that President Trump might and probably will exploit to divide EU solidarity. Agriculture is a case in point. In announcing the US-UK agreement the White House made much of the “ $5 billion opportunity for US farmers, ranchers and producers”. Given the importance of agriculture to President Trump’s base, there will be pressure for similar concessions in any deal EU-US deal. The pushback from Europe’s farmers to the Commission’ Multilateral Financial Framework proposals is likely to incentivise President Trump to drive a hard bargain in agriculture.

Digital services is another area where the EU could be ‘played’. While the European Commission has dropped its digital services tax plans it is not beyond the bounds of possibility that the US might seek to cause mischief by attempting to bring Member State digital taxes into the discussions.

An additional complication is the reality that much of President Trump’s response to anything that the EU does or offers is likely to be informed, if that is the right word, by his open dislike of the EU. As recently as 13 March the US President posted on Truth Social that “the European Union is one of the most hostile and abusive taxing and tariffing authorities in the world” and that the EU “was formed for the sole purpose of taking advantage of the United States”.

The US President also has some very clear likes and dislikes amongst European leadership.

Go to war or continue talking

Since April, “Liberation Day’ the EU has exercised restraint, seeking a resolution through negotiations. Going forward the consensus on this approach will face challenges.

Some advocate a more aggressive approach, arguing that the EU should push back. The case is made that the EU should seek to inflict maximum possible damage on the US economy through targeted tariffs on US goods and that the EU’s anti-coercion tool should be used with the objective of triggering major US companies to lobby the US President to relent.

Even if all EU member states were to sign on to the idea, which is not going to happen, the execution of an all-in trade war would require time. Time is in short supply.

A more logical approach for the EU would be to follow the line taken by the UK Government in May, propose a limited deal covering a handful of key areas, set late August or early September as the date to initial a draft agreement with a view to a full sign off in October. Agreeing on details will not be easy, however the arrangement worked in the US-UK case and could work again for the EU.

The Juncker Commission pursued a similar approach with the Trump 1 administration in 2018.

Going forward, unity on the EU side will be critical. Europe’s negotiating position will be strongest if EU leaders agree on a common response, stick to that response and avoid the temptation to grab headlines by ‘venting’ about President Trump ‘s erratic behaviour.

As is so often the case, history provides some guidance. In 1841 the British government found itself in turmoil on the issue of tariffs. Opinions were divided over tariffs on corn imports. At the end of a contentious debate the Prime Minister, Lord Melbourne, cautioned his colleagues “it is not much matter which we say but mind we must all say the same’.

In the weeks ahead EU leaders should be mindful of Lord Melbourne’s advice – whatever they say they should say the same thing, stick together, stay calm and carry on negotiating. An EU variation of the U.S.-UK Economic Prosperity Deal (EPD) with a suitably grand title would allow President Trump the opportunity to claim another major breakthrough and with any luck keep him off Europe’s back for the balance of his second term.

EUalive’s columnist Dick Roche is a former Irish Minister of State for European Affairs. His columns can be found here.

Caption: US President Donald Trump is seen on a television screen while a trader works on the floor of the New York Stock Exchange as financial markets react to news that the United States and China agreed to cut trade tariffs in New York, New York, USA, 12 May 2025. US Treasury Secretary Scott Bessent announced on 12 May that the United States and China had agreed to cut reciprocal tariffs for 90 days. EPA/JUSTIN LANE