Europe tariff delay won’t calm markets for long analysts warn

Markets were hit with more uncertainty on Sunday after US President Donald Trump agreed to delay his proposed 50% tariffs on European Union goods.

The White House confirmed that Trump made the decision after a call with European Commission President Ursula von der Leyen.

Trump posted on social media that the EU had been “very difficult to deal with,” and made it clear he’s not happy with how talks have gone so far. On Monday, European stocks opened stronger after sliding on Friday, when Trump’s initial threat rattled investors. 

But analysts immediately warned that this delay changes nothing fundamental. The risk of a trade war between the world’s two biggest economic blocs is still alive, and markets aren’t convinced this pause means resolution.

Trump’s shock approach meets Europe’s slow pushback

Ursula von der Leyen posted on X over the weekend, saying the EU was ready to “advance talks swiftly and decisively.” She added, “To reach a good deal, we would need the time until July 9.” 

An EU official, speaking to CNBC, allegedly said that European Trade Commissioner Maros Sefcovic would meet his American counterparts on Monday to restart the stalled negotiations.

Holger Schmieding, Chief Economist at Berenberg, told CNBC’s Europe Early Edition that six weeks isn’t enough to work out the details, but it might be enough to sketch out a broad agreement.

“It should be enough to get an agreement like the one between the US and the U.K.,” Holger said, suggesting a potential 10% tariff on all EU imports, minimal retaliation from Europe, and some final sector adjustments handled after July 9.

But Holger warned that if Trump raises the rate to 20% or 30%, the EU would be forced to hit back. “The EU would have no choice” but to impose strong countermeasures, he said. Pharmaceutical exports and even services could be targeted.

Holger said Trump’s negotiation style is “interesting” and described his approach as trying to shock the other party into submission. He doesn’t think it’ll work here. “The European Union is not a region which can be scared into just throwing in the towel,” Holger said. 

He reminded viewers that Europe has its own leverage and size. “We do matter in economic terms to the US quite a lot, not just vice versa,” he added.

Investors frustrated by uncertainty and lack of clarity

Guntram Wolff, Senior Fellow at Bruegel, also spoke to CNBC on Monday. He didn’t mince words. “This uncertainty is bad for business, it’s bad for consumers, and frankly, it’s an unnecessary step in the negotiations,” Guntram said. He pointed to one big problem: nobody really knows what Trump wants. “It’s very unclear what exactly the US President wants,” he said. “That’s the biggest obstacle at this stage.”

Guntram said the EU has already made proposals and is waiting for Washington to respond. In comparing strategies, he noted that the U.K. gave in to Trump’s demands easily, while China escalated things to the point where the US eventually backed down. 

The EU, he said, is trying a middle strategy—neither caving nor provoking. “Europe sort of tries to take a middle path,” he said. He also pointed out that Europe has the capacity to retaliate, especially with its dominance in pharma and services, but has so far chosen not to. “But at the end of the day, that might not be enough now,” he warned.

On the investor side, Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said the delay created a short burst of confidence but not enough to change the overall risk. “Looking ahead, the EU-US trade dance is a high-stakes tango, with July 9 as the next flashpoint,” Naeem wrote in an email to CNBC.

He said the EU is offering phased tariff reductions and talks based on “mutual respect,” but Trump’s aggressive tactics could derail everything. Naeem said tech and industrial companies are most at risk and that markets will react sharply to any headline or tweet.

“Markets will hang on every tweet and trade talk whisper, with investors betting on whether this delay is a genuine olive branch or just Trump reloading for a bigger tariff showdown,” said Naeem. His advice to investors was simple: “Buckle up; this ride’s far from over.”

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now