Trump’s bet on 50% EU tariffs could backfire

Donald Trump has threatened to slap a 50% tariff on all imports from the European Union starting June 1. He clearly thinks this move will force Brussels into making major trade concessions, even as investors warn it could wipe out the modest global stock market recovery.

Until now, talks between Washington and Brussels have made only slow progress. But Trump’s sudden announcement that he will impose heavy duties on EU goods has shifted the negotiating ground. If no agreement is reached, he plans to begin on June 1.

FT reported that financial markets have been at ease recently due to Trump’s friendlier trade talks with Britain and China. Now, investors worry that a fresh tariff war with Europe could undo the recovery in global stocks and strain relations with long‐time allies.

“It’s a classic Trump bullying tactic,” said Bill Reinsch, a trade expert at the Center for Strategic and International Studies in Washington. “If he doesn’t get what he wants, he pushes back with threats and waits to see what happens.”

Reinsch added that the aim is to make European leaders “back down,” though he doubts they will.

On Friday afternoon in the Oval Office, Trump insisted he was in no rush to strike a bargain before the deadline. “That’s the way it is,” he declared, reaffirming his plan to proceed with the 50% tariffs unless Brussels agrees to US demands.

US Treasury Secretary Scott Bessent told Fox News that the tariffs were meant to “light a fire under the EU.” He hinted there could be room to talk both before and after the official start date.

A note from Oxford Economics said the threat of tariffs “will keep policy uncertainty elevated” since the administration may use duties as leverage any time talks stall.

It remains unclear what the US wants from the EU

In a social media post on Friday, Trump listed complaints about EU taxes, regulations, and trade rules that would be hard to fix quickly.

Washington trade experts are fed up because the EU is repeating the same offers as before, and those offers never led to a deal. “Traditional methods haven’t produced a US‐EU agreement under any administration,” said Kelly Ann Shaw, a former White House trade official.

Shaw, now a partner at Akin Gump law firm, said the threat of much higher tariffs “creates an action-forcing event” that will force both sides to decide soon whether they can reach a deal.

From Washington’s view, the Europeans don’t seem to grasp that this round of talks is different and won’t follow the usual give‐and‐take, Reinsch said.

On Friday, EU Trade Commissioner Maroš Šefčovič held talks with US Commerce Secretary Gina Raimondo and Trade Representative Katherine Tai. There was no sign of a breakthrough.

Afterward, Šefčovič wrote on X that “EU‐US trade is unmatched & must be guided by mutual respect, not threats. We stand ready to defend our interests.”

EU officials wonder why they should give in so much when US and EU import taxes are nearly the same, only about one percentage point apart, and Europe’s VAT works out much like sales taxes in the US.

Brussels also resists giving the US market access that other countries lack, warning it would violate World Trade Organization rules.

Further complicating matters, many of the trade barriers the US objects to are set by national governments, even though EU trade policy is handled in Brussels.

“EU negotiators should hold their nerve,” said Georg Riekeles, associate director at the European Policy Centre in Brussels. He pointed out that Canada and China have met US pressure with strong retaliation. “If the EU is ready to fight back, US bullying is ultimately self‐harmful, and you can move toward a deal.”

But some EU members, such as Ireland and Italy, rely heavily on US exports and have decided against tough countermeasures. Trump may be hoping these splits will weaken Europe’s unity.

Michael Smart, a former congressional trade counsel, warned that trying to split the EU could backfire.

Most EU governments have so far backed the commission’s cautious approach of talking while buying time. They believe that, sooner or later, Trump will eventually back down because his tariffs would end up hurting the US economy.

“One reason markets have calmed is that they’ve already priced in some concessions from Trump,” said one EU diplomat.

Another added, “We don’t make policy decisions on the basis of tweets, at least not on this side of the Atlantic.”

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