The United States has announced sweeping 30% tariffs on European and Mexican imports effective from 1 August, in a move widely seen as a dramatic escalation in global trade tensions. The surprise development came just hours after speculation swirled about a possible EU-US trade deal, raising questions about the credibility and direction of current negotiations.
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According to ING economists Carsten Brzeski and Inga Fechner, the move represents a "make-it-or-break-it moment" in transatlantic trade relations, as Europe braces for the economic and political fallout. 'The letters show that the US administration is increasing the pressure to reach some kind of deals,' they write. 'Whether negotiators are close to or still far away from reaching such a deal remains unclear.'
While the EU has not yet retaliated, the European Commission confirmed on Sunday that its €21 billion countermeasure package will remain suspended until the 1 August deadline. This, experts note, is a strategic delay mirroring the US timing. 'Why strike back now if the counter-tariffs were also held back before?' the ING report questions.
Potential EU responses range from increased purchases of US goods, such as liquefied natural gas and military equipment, to more politically sensitive measures like lowering agricultural standards or reducing tariffs on US cars. However, the most severe options remain on the table, including strategic export bans and digital service tariffs. ING cautions: 'The final option would lead to a fully-fledged trade war between the US and Europe and we can only repeat our earlier view that there are no winners in trade wars, only losers.'
The consequences for Europe could be significant. ING estimates that a 30% universal tariff could "shave off some 0.4pp of GDP growth," potentially tipping the Eurozone into recession. Despite the severity of the measures, ING analysts expect a compromise may still emerge, possibly settling on a mix of universal tariffs at 10% and sector-specific duties between 20% and 25%. 'Is this a conviction call? No,' they admit.
Still, even a deal may offer little reassurance. 'Any "big, beautiful deal" that might be reached over the next weeks will not come with a guarantee that it will last,' the analysts warn. 'In today's trade landscape, nothing can be taken for granted.'
President Trump's letter, they conclude, 'is not a love letter but also not a hate letter. It's a letter to increase pressure in the ongoing negotiations.' With just weeks to go, the world watches as Europe decides whether, and how, it will respond.
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