The transatlantic trade relationship between the United States and European Union is becoming increasingly contentious. President Donald Trump’s latest proposal is a shock-inducing 50% tariff on all goods imported from the EU. This recommendation comes on the heels of much attention paid to the recent tariffs imposed by the US. These are, to pick just three examples, a 25% tariff on EU steel and aluminum, a 25% tariff on EU-made cars, and a 10% tariff on all EU imports. The proposed tariff is already scheduled to go into effect on June 1.
Since mid-March, the US has been continuing to collect its 25% steel and aluminum tariffs. It has further placed the same punitive tariffs on automobiles manufactured in the EU. A surprise 10% tax on most imports is likely to be extended until at least July 8. Europe’s auto imports are noisy, they’re unpopular at home, and unlike the situation over China, there are domestic alternatives on offer. This decision does represent a major pivot away from his trade policy. This youngest twist has rattled world markets. In reaction, European stock indexes are down 1% to 2.5%.
Impact of Proposed Tariffs
President Trump’s extremely aggressive tariff proposals have set EU leaders on high alert. The European Union has long pushed for an immediate and permanent elimination of tariffs to zero in EU-US trade talks. Maroš Šefčovič, a high-ranking EU official, punctuated the President’s challenge with his own enthusiastic reply. He concluded by reasserting that mutual respect is key to strong trade relations.
“EU-US trade is unmatched & must be guided by mutual respect, not threats. We stand ready to defend our interests.” – Maroš Šefčovič
In response to the proposed tariffs, financial markets moved immediately. US stock futures dropped off a cliff after President Trump started talking about Apple. Otherwise, he said, the tech giant will be slapped with a floor tariff of at least 25% unless it relocates its iPhone production to America. This climate of uncertainty for Apple’s operations has added to concerns over the potential widening of existing trade hostilities.
Apple’s Position in Trade Negotiations
The debate over tariffs is especially relevant to Apple and its chief executive Tim Cook. If you needed any more proof, President Trump has recently let it be known that Apple ought to start making iPhones in this country, not overseas. He stated,
“I have long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India, or any place else.” – Trump
The President’s comments come as Apple takes significant steps to shift its production settlement to India. This change would significantly affect the tech behemoth’s business practices. The threat of massive tariffs might be the tipping point against these expansions that forces the company’s decision-makers to slay the dragon.
EU’s Response and Future Outlook
The European Union has been proactive in its response as the situation is rapidly changing. Just like you, they’re determined to get a good deal for both sides. As Commissioner Maroš Šefčovič said, the EU is still committed and on-board in these negotiations.
“The EU’s fully engaged, committed to securing a deal that works for both.” – Maroš Šefçovič
Given the current state of US-China relations, few would suspect that such a truce could talk recently occurred. This deal makes the improving dynamic of international trade relationships even more difficult. This month, administration officials announced they would lower the tariffs on China to 30%. In sharp opposition, these four Democrat members proposed new tariff hikes on EU imports.
Leave a Reply