Frankfurt, Germany (AP) — The head of the European Union Executive Committee has confirmed that efforts are underway to secure a trade agreement with the Trump administration, aiming to avert a 50% tariff on imports. Trump initially threatened to impose tariffs on June 1, but later postponed the deadline to July 9, utilizing tactics typical of trade wars.
European negotiators are grappling with Trump’s unpredictable and frequently changing tariff threats; nonetheless, “they must still devise a way to satisfy his demands,” remarked Bruce Stokes.
Stokes believes that the issues extend beyond mere disagreements over the trade deficit. Trump’s threats are “fueled by frustration with the EU, largely unrelated to trade,” he stated. “He has a disdain for the EU and particularly for Germany.”
The container is depicted on Thursday, May 22, 2025 at a freight terminal in Frankfurt, Germany (AP Photo/Michael Probst)
What exactly does Trump want? What can Europe provide? Here is a critical area where both sides are at odds.
Buy Our Products
Trump has repeatedly expressed discontent over Europe selling more to Americans than it purchases from them. Last year’s trade deficit for goods stood at 157 billion euros ($178 billion). However, Europe has a surplus in services, particularly in digital services like online advertising and cloud computing, which minimizes the overall trade deficit to 48 billion euros, roughly 3% of total trade. The European Commission asserts that trade is “balanced.”
One way to adjust the trade balance is to cease remaining imports of Russian pipeline gas and LNG, prompting Europe to procure more liquefied natural gas from the US. The committee is drafting legislation aiming for Europe to buy about 19% of its imports from the US by the end of 2027.
Laurent Ruseckas, a natural gas market expert at S&P Global Commodities Insights Research, noted that while this encourages European companies to seek alternative gas sources like the US, the transition from Russia is already underway and “clearly insufficient to satisfy” demand.
The committee will not directly buy gas but can utilize “moral suasion” to motivate businesses to opt for US suppliers in the coming years. However, “this is not a silver bullet and cannot yield immediate outcomes,” said Simone Taliapietra, an energy analyst at a Brussels think tank.
Carsten Brzeski, global chief at ING Bank Macro, stated that buying more from US defense contractors is essential for addressing potential Russian aggression following the invasion of Ukraine. Stokes from the German Marshall Fund argued that if European nations increase overall defense spending, another of Trump’s demands will be for them to purchase from European defense contractors instead of the US. One potential solution to navigate this political barrier is for US defense firms to establish factories in Europe, although “this will take time,” he cautioned.
The EU might consider reducing a 10% tariff on foreign cars, another of Trump’s long-standing grievances. “Many carmakers are not inclined to export to Europe anyway… Germans are typically the most resistant, but I doubt they are overly concerned about competition from the US,” stated Edward Alden, a senior fellow at the Council on Foreign Relations.
Beef Issues
The US has long voiced objections to European regulations concerning food and agricultural products, with exceptions for beef and chicken treated with chlorine-washed hormones. However, experts do not foresee EU trade negotiators offering any concessions during discussions.
“The EU is reluctant to yield,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. “The EU has consistently maintained that it will not alter hygiene standards, (genetically modified) crop legislation, chlorinated chicken rules, or longstanding US stimulants regulations.”
Supporting her viewpoint, she added, “The United States cannot set European food safety standards.”
Value-Added Tax
One of Trump’s consistent frustrations is the value-added tax (VAT) implemented by European governments, which he argues places an unfair burden on US businesses.
Economists assert that this type of tax, utilized in approximately 170 countries, is trade-neutral as it applies uniformly to imports and exports. VAT is charged to the final consumer at the register and differs from sales tax in that it is calculated at each production stage. Ultimately, both VAT and sales tax treat imports and exports similarly, while the US is unique in not having a VAT.
There is minimal likelihood that the US will revise its tax system for Trump’s benefit, and the EU has ruled out any potential changes.
Negotiation Tactics
Trump’s negotiation style involves alarming fee threats, such as potential tariffs of 145% on China, before settling at much lower rates. The White House has maintained that no reductions below the 10% baseline will be tolerated. The prospect of a 50% tariff on the EU would be so steep that it would feel like “an effective trade embargo.” According to Brzeski, the resultant costs would make imported goods pricey, thus hindering competitiveness.
The most contentious issues dividing the EU and the US—including food safety standards, VAT, and regulations for high-tech firms—are “unlikely to be resolved within any reasonable timeframe,” Alden stated. What he announced in the UK on May 8th.
Economists Oliver Lacau and Nicola Novill from Oxford Economics observed that a 50% tariff could potentially compress the euro by up to 1% next year, adversely impacting the collective economies of 20 nations and significantly reducing business investment.
The EU initially offered a “zero for zero” proposal, advocating for the removal of tariffs on industrial goods from both sides, including automobiles. Trump has dismissed this offer, but EU officials insist it remains a viable option.
Lovely from the Peterson Institute perceives Trump’s threats and aggressive maneuvers as integral to his negotiation strategy. “In the short term, I do not envision a 50% tariff becoming reality,” she remarked.
However, she warns that Trump’s approach fosters uncertainty regarding US policy, which paralyzes businesses. “It paints the US as an unreliable trading partner operating on whims rather than established laws,” Lovely emphasized. “Neither allies nor adversaries will be treated fairly by this administration.”
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Wiseman contributed to this report from Washington.
Source: apnews.com