Donald Trump’s “liberation day” tariff onslaught is fast approaching, all over again. The president’s “reciprocal” tariffs, which were paused in April after markets reacted negatively, are supposed to come into force on August 1 for countries that fail to strike trade deals with Washington. As it stands, that is the case for the vast majority of America’s trade partners — chief among them the EU, the biggest partner of all.
The August 1 deadline will test the complacency that has prevailed in financial markets since Trump’s partial retreat in April, which still left in place a baseline tariff of 10 per cent plus higher levies on cars and steel. It is also a moment of truth for the EU, which must decide quickly how hard it is prepared to hit back if talks fail. Trump is in no hurry to cut a deal with a trading bloc he seems to despise. Earlier this month, when officials on both sides of the Atlantic could discern a landing zone for agreement, the president upped the ante, raising the threatened reciprocal tariff from 20 to 30 per cent. And, as the FT reported last week, just as European negotiators resigned themselves to his 10 per cent baseline tariff, Trump demanded 15 or 20 per cent.
The EU has struggled to present a consistent strategy. The European Commission initially stood firm against the 10 per cent baseline. But after the UK secured an agreement, Germany and other member states wobbled and pushed for a similar deal. With Trump now playing hardball, Berlin appears to favour a tougher stance.