Discussions between Brussels and Washington come into a decisive phase when they have to end before August 1. France and Germany clearly threaten Donald Trump to retaliate to a unilateral increase in customs duties.
“Europe is coming tomorrow, and the next day, we have others who arrive,” said Donald Trump on Tuesday, July 23, after announcing the conclusion of an agreement with Japan on customs duties.
Under pressure for several weeks and in a delicate economic situation due to persistent inflation (3% in 2024), Tokyo finally agreed to pay customs duties of 15% on most products, including cars, except steel and aluminum which will remain 50% punctuated.
The American president had threatened Japan, the leading source of foreign investment in the United States and dependent on Washington on the military level25%customs duties.
The terms of this agreement could serve as a framework for discussion between Washington and Brussels, while discussions must be completed by August 1.
“Customs duties of 15 % imposed in Japan constitute a much more likely model for the EU than the agreement between the United States and the United Kingdom,” observes economist Sander Tordoir, from the Center for European Reform (CER), a European research institute.
“The United Kingdom is an industrial dwarf (with crowned heads and golf courses that Trump appreciates). The EU looks more like Japan: the block will be imposed higher customs duties, under penalty of having to take the risk of riving up,” continues the economist.
Trump does not give up anything
A few weeks ago, Brussels hoped to obtain a deal More favorable than that found by the United Kingdom, with customs duties of 10% on most products. “I would not call this a trade agreement at all,” the Swedish Minister of Commerce, who threatened the uncle Sam in mid-May, was in mid-May, who threaten the uncle of retaliation measures.
But the defense of European interests has not progressed since then. Worse, the American position has hardened and the EU does not seem to have succeeded in obtaining major concessions.
In a brutal pressure stroke, Donald Trump even threatened the Union to bring customs duties to 30% from August 1, when they were only 2.5% on average before his return to power. According to Goldman Sachs, this could cause a 1.2% drop in European GDP by the end of 2026 and therefore very seriously influence already fragile growth.
“The United States is looking for an asymmetrical agreement,” has their own advantage, recalled Marc Ferracci on Tuesday, the Minister of Industry, pointing out the “deadly danger” that this could represent for certain French industrial sectors.
Suspended response
Europeans are now in front of a complex choice. “Will the EU prefer to be satisfied with a similar basic price of 15 % or try its luck on August 1 and risk a climbing cycle?” Summarizes the economist Brad Setser, specialist in international trade at the Council on Foreing Relations, an American research center, on X.
Donald Trump has already assured that he would wear customs barriers beyond 30% if the EU tried to defend himself.
For several weeks, France, however, has been pushing in this sense, notably demanding the use of “the anti-coercion instrument”, created in 2023 by the EU precisely for this type of situation. Germany, which was hitherto partisaning a more attractive line with Trump, has now approached the tricolor position according to the Financial Times.
However, the British daily notes “that a silent majority of” member states seem opposed to the outbreak of what is presented as a “commercial bazooka”.
These different positions are widely explained by the structure of the economy of different European countries.
France, in the process of advanced deindustrialisation, displays a deficit commercial balance with the United States (it imports more than it exports), unlike Germany which gave a record surplus last year, and which needs the American market to ensure the survival of its increasingly weakened industry.
Lists of American products likely to be struck by countermeasures have been prepared. If a response was decided, nearly 100 billion euros in goods would be affected, especially in aeronautics, automotive and medical equipment. According to Bloomberg, they could be subject to a 30% tax if no agreement was reached.
A higher cost for Europe
Before the EU, China managed to influence the fury of the American president. For this, it notably restricted the exports of rare earths, on which it has an almost monopoly. These raw materials are absolutely essential to the functioning of the American economy and even its military power. Beijing produced almost all of the Samarium used in American missiles and combat aircraft reported a New York Times investigation.
The EU probably has no pressure means of this type. And it is in a very different situation from China, which has long been prepared for climbing tensions with the United States and has made colossal efforts to reduce its dependencies.
Some observers still believe that Europe should respond. Olivier Blanchard thus called for “smart reprisals even if they lead to dangerous economic and geopolitical situations in the short term”.
In this company, the former IMF economist chief pleaded for the EU to join other countries such as “Japan, Canada, Brazil and anyone who wishes to participate” in order to bring the United States to a reasonable position “.
Whatever happens, it is likely that the EU will undergo a more important tribute than its American ally.
“Without reprisals, the cost of US protectionism is for the Low United States, close to zero. With European reprisals, this cost becomes significant for the United States, even if the damage remains twice as high for the European Union,” said CEPII (Center for Prospective Studies and International Information) in a Note published in May Last, which envisaged the effects of economic response from the EU.
