Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The EU must make a “credible threat” of retaliation in Donald Trump’s trade war if it wants to get a good deal, a senior official has warned ahead of a looming talks deadline.
Bjoern Seibert, the European Commission president’s chief of staff, told the bloc’s ambassadors after the G7 summit in Canada last week that the prospect of a strong response would help convince the US president to reduce stiff tariffs on the EU, according to two EU officials.
German Chancellor Friedrich Merz signalled that his government would back a more muscular approach. “We’re ready to use a variety of options if there is no deal. We can and we will defend our interests,” he told the Bundestag on Tuesday.
Trump threatened to impose a 50 per cent “reciprocal” tariff on the EU if there is no breakthrough in trade talks by July 9. He is also seeking to reshore American manufacturing to reduce a €198bn annual trade deficit in goods that the US has with the bloc.
The UK last week finalised its deal with the US, still the only one it has signed. London agreed to 10 per cent tariffs, some reduced tariff quotas on cars and steel and eased market access for US ethanol and beef.
Seibert told ambassadors the commission’s president, Ursula von der Leyen, was prepared to escalate in order to extract a better deal. He asked for their backing for a package of tariffs on €95bn worth of US goods, and said the commission was also preparing measures against services — including levies on US technology companies and limiting access to public procurement contracts for American businesses.
The message was that “we need leverage with a credible rebalancing package”, one of the officials said.
Member states had backed levies of up to 50 per cent on €21bn worth of American goods, but the commission postponed their application until July 14 to allow time for talks.
That package was reduced from an initial €26bn after France, Italy and other alcohol-producing nations complained that targeting US whiskey and wine risked retaliatory Trump levies of up to 200 per cent. Commission officials fear a similar effort will take place to cull sensitive products from these fresh measures.
Ireland has asked for aircraft, medical equipment and some food to be exempted, while Belgium succeeded in keeping diamonds off the initial list.
EU negotiators have privately conceded that they will not be able to get Trump to lift the baseline 10 per cent tariff he has imposed on all imports. What they aim to reduce are additional US levies on steel and cars, and potentially on semiconductors and pharmaceuticals.
The EU strategy also involves discussing “non-tariff barriers”, policies the US believes hinder its companies from doing business in the bloc.
Matthias Jørgensen, a senior commission official involved in talks, told the European parliament on Tuesday that changing regulations to suit Washington was a “red line”. But he added that the commission would help American companies comply with rules.
The bloc is already weakening green rules in a push to improve competitiveness, and has tried to sell this to Trump as a response to his tariffs.
Jørgensen expressed scepticism that the EU would succeed in eliminating all US tariffs. “Getting income is an important factor for the US”, as is the wish to “onshore production”, he told MEPs.
“We’re negotiating as vigorously as possible,” he said, adding that “we also need to consider the possibility that we will end up in a scenario, a very realistic scenario, in which the tariffs, or some of the tariffs, of the US will be maintained.”
A commission spokesperson said the EU was committed to maintaining a “credible threat” to secure a fair deal with the US.
Internal consultations were ongoing on retaliatory measures against the US tariffs, the spokesperson added.
“Our primary goal remains to reach a negotiated, mutually beneficial agreement, and we are fully engaged in negotiations. However, in case a satisfactory outcome is not found, all instruments and options remain on the table.”
Additional reporting by Laura Pitel in Berlin
