Donald Trump’s threat to impose 30 per cent tariffs on imports from the European Union increases the risk of a transatlantic trade war. However, further talking lies ahead before the August 1st deadline when these tariffs are due to be imposed.
Will the 30 per cent tariffs ever be introduced?
Trump will know that tariffs at this level would be hugely damaging to the US, as well as Europe, and would surely set off a trade war.
The reaction of markets on Monday will be worth watching and could have an impact on what happens next.
Trump may well be threatening chaos in a bid to win late concessions. However, the tone of his letter to European Commission president Ursula von der Leyen means the damage caused will not be easily repaired. Trump is playing a dangerous game.
RM Block
There will be more talking, but some EU leaders already feel Europe is offering too much and should have responded earlier with its own tariffs.
Wasn’t a trade deal almost agreed in principle, anyway?
It was. And this is why the EU was so surprised by Trump’s latest move. It now remains to be seen whether a basis can be found to restart trade talks. The EU has already moved a good distance to get a deal with Trump and thought there was an agreement in principle with their US counterparts. They had accepted that the 10 per cent tariffs which Trump imposed would remain in place, a significant concession. The need in Europe for US support for the war in Ukraine has also been a key factor in the conciliatory EU approach, as well as a desire to avoid a full-blown trade conflict.
Now Trump has thrown this back in Europe’s face.
Europe’s politicians – including Taoiseach Micheál Martin and Tánaiste Simon Harris – have responded by saying that negotiations will continue. In private, however, they will be furious and wonder whether there is any point negotiating with senior US ministers when their president can just cast the outcome aside.
Trump’s letter could hardly have been more dismissive and disrespectful. It threatens that if the EU responds with tariffs of its own, the US tariffs will increase to match, above the 30 per cent level. This is how trade wars start, causing huge economic damage if they continue for any prolonged period.
What happens now?
Europe’s politicians faced one immediate decision – whether to extend the deadline for imposing tariffs on €21 billion of US imports into the EU, in retaliation for Trump’s earlier move on steel and aluminium. These had been delayed but were due to come into force at midnight on Monday. On Sunday, von der Leyen announced that the deadline will be extended to “early August” around the time of Trump’s new deadline. The message is that the EU wants to talk, but is prepared to respond if there is no deal.
EU trade ministers will gather on Monday to discuss the issue further.
How will this affect Ireland?
For Ireland, all this underlines the uncertain international economic backdrop and the risks ahead. An all-out US/EU trade war would hit Ireland particularly hard, given the economy’s strong trade and investment links with the US.
A permanent 30 per cent tariff would also be hugely disruptive to Irish exports to the US and transatlantic trade – and would cost growth and jobs. But, as it is just the latest in a series of threats of tariff levels, we need to wait and see.
[ The EU/US tariff deal: The good, the bad and the potentially ugly for Ireland ]
Among the Irish exports exposed to higher tariffs are food and drink – such as butter, whiskey and cream liqueur – and medical products. They are all already paying the additional 10 per cent charge imposed in the spring.
Ireland’s biggest exports to the US are, of course, pharma products. They have not been the subject of tariffs so far. It appears that these may not be included in the latest threat.
Is this all just a ploy by Trump?
Europe will see Trump’s move as a negotiating tactic and will hope this was just a bit of Trump showbusiness on the way to a deal.
But with the EU already feeling it has offered a lot to Trump, what else can now be put on the table? French president Emmanuel Macron said on Sunday that the EU must be ready for a trade war. The risk of a bad outcome has just gone up.
