-49%. It is the collapse in container bookings for the first week of April. Yes, the one of Liberation Day. Hardly is a figure more effective to describe the disruptive impact of Trump’s (not so) reciprocal tariffs. This fall is even steeper than the one in the early days of the pandemic.
Things could improve now that the US is negotiating with most of its trade partners – one can only imagine the pressure on US trade officials, who are engaging in bilateral talks with over 60 countries simultaneously.
In this post-Easter TradeViews, we look into the global ripple effects of Washington’s flurry of tariff announcements, as the EU attempts to negotiate while cooking its retaliation. But reacting to US unilateralism also means reviving EU trade relationships all over the world, with new free-trade scenarios opening with Australia, the United Arab Emirates and even China!
This and more on TradeViews.
Tariffs in, tariffs out
A pause of reflection is much needed amid the flurry of duties, threatened duties, retaliations and negotiations that characterised the first weeks of April. The European Commission suspended its retaliatory duties on certain US agri-food and manufacturing products until July 14, following the US decision to pause the 20% reciprocal tariff on the EU – while keeping the universal 10% tariffs and the “pre-Liberation Day” 25% duties on cars, steel and aluminium.
Italian PM first name Meloni took the initiative in this limbo for a blitz to Washington on April 18. As usual for these types of meetings, there was no concrete outcome – the Commission has full powers on trade policy after all – but President Donald Trump said there is a 100% chance of a tariff deal with the EU, meaning, implicitly, that for the first time US officials have a negotiating mandate with the EU.
But a deal on what? Reportedly, there is confusion on what Washington’s asks are. Commission President Ursula von der Leyen came forward with a zero-for-zero tariff agreement on all industrial goods. This does not seem of interest for the US Administration, which in fact long discussed EU non-tariff barriers with Trade Commissioner Maros Šefčovič, who was in Washington shortly before PM Meloni. The Commission showed flexibility on some standards, notably on energy to allow more import of US LNG. However, it rushed to clarify that EU health and food standards are “sacrosanct”. Compromises on VATs and new digital laws seem unlikely too.
With the White House threatening further duties on pharmaceutical products and semiconductors, and the Commission potentially considering retaliation on US services (more below), the situation is far from quiet.
Interestingly, the Commission’s list of US products for retaliation was downsized from €26 to €22 due to the notable exclusion of US wine and bourbon, as requested by the EU sector, which President Trump had threatened with a 200% tariff. France and Spain were among the countries that insisted on this exclusion, while simultaneously being the main advocates for a robust response to US unilateralism… ok to retaliation, but “not in my backyard”.
The Take: Diversification is becoming even more a key principle for the Commission. There already has been an evident push to the Commission’s free trade agenda in the aftermath of the Trump election, which is intensifying now that the President is walking the talk. Will the Mercosur FTA be the first to benefit?
Zoom in: Japan and India are reportedly the first in line for a deal with the US. However, we’re talking about general frameworks to suspend the tariffs as well as reassure businesses and markets, rather than full-fledged trade agreements.
Zoom out: Ultimately, it’s important to understand what is the end game for the US. In the first Trump Presidency, tariffs were used as tool to obtain a broad range of concessions, beyond economic ones. This time, some argue, protectionism could be part of an industrial policy which, in quite a risky way, aims at devaluating of the dollar and relocating industries into the US.
Nothing as certain as death and taxes
After Trump’s sweeping tariff announcements and despite the 90-day truce, the Commission wants to hit the US where it hurts – right in the Silicon Valley.
There’s already a tug of war between Brussels and DC over digital laws like DMA, DSA and the AI Act. The Trump administration has described EU rulebook as “overseas extortion” while Commissioner first name Virkkunen remains adamant that the tech rules are not targeting the US companies, and therefore not up for negotiation in the context of a future trade deal.
Still, fines are just the beginning. President von der Leyen suggested that the EU could tax Big Tech if trade talks fail in a move that has some EU countries cheering and many squirming. France is leading the cheer squad, keen to impose a tax on digital services – it already has a domestic digital services tax, as do some other EU countries like Austria, Spain and Italy.
Ireland, on the other hand – where many US tech companies have their European headquarters – is not fond of the idea of a new EU-wide tax, as it already relies on Big Tech for its corporate tax revenues. Germany has also come out against the proposal, citing the EU’s reliance on the US for data centres, cloud, and AI services. After Meloni’s recent trip to DC, Rome joined the chorus of sceptics, though didn’t promise to lift its own web tax that brings in short of €500 million annually.
In the end, there is no clear-cut way to implement a digital tax like this. It would require unanimity among all Member States, and the tax could hit European businesses and consumers harder than those in the US, not to mention further escalate EU-US trade tensions. The use of the Anti-Coercion Instrument may also not be a feasible solution, as Big Tech has a strong presence in Europe that protects them, according to Bertin Martens of the Bruegel think tank.
It might be that the digital tax threat is just a power move by von der Leyen, but it could also trigger movement on the global tax deal negotiations at the OECD – we will keep you posted.
Re-discovering old trade friends
Following Washington’s hectic new approach to trade relations, the EU is looking to strengthen its commercial partnerships with new and old allies, including down under. Both the Brussels and Canberra are looking for potential partners to diversify their supply chains, which in both cases, largely rely on China and the US. The EU and Australia had already initiated negotiations for an FTA in 2018, but the talks collapsed in October 2023 over disagreements on the quotas of Australian agri-food (notably meat and sugar) that could enter the EU market.
However, the push for the conclusion of an FTA is now gaining new momentum. The two parties indicated the will to re-launch negotiations talks following their respective elections, and with Australia going to the polls on May 3rd, this moment is about to come. Over the past months, Australian and EU officials have also been growing increasingly vocal on the need to conclude the agreement. Gabriele Visentin, the EU’s Ambassador to Australia, noted that the FTA should be a “no brainer” given the fast-paced developments from Washington, while Australia’s Trade Minister Don Farrell underlined his determination to conclude the agreement. Reportedly, Trade Commissioner Šefčovič is now awaited in Canberra soon after the elections.
In spite of the good mood, it is important to underline that agri-food imports will still remain a contentious issue, as Australia farmers will not drop their determination to have good access in the EU market.
enGulfed: The EU’s Strategic Pivot to the UAE
The search for new economic partners continues in Brussels, with the Commission now eyeing deeper trade relations with the United Arab Emirates. On April 10, President von der Leyen held a phone call with UAE President Sheikh Mohamed bin Zayed Al Nahyan, where the two leaders agreed to launch negotiations on a free trade agreement.
Both the EU and UAE view this agreement as strategic move to diversify their trade partners following President Trump’s global tariffs. The EU mainly imports mineral fuels, oil and mining products from the UAE, while it mainly sells machinery, transport equipment and chemicals. In 2024 alone, the trade volume between the two countries was €55.94 billion.
The UAE has long hoped to strike a trade agreement with the EU, but Brussels has always been more interested in involving the whole Gulf Cooperation Council (GCC) in a deal. This FTA, which President von der Leyen promises to conclude “in the next months”, can serve for the EU as a first step towards finalising future trade agreements with other GCC countries.
The enemy of my (temporary) enemy…
Confronted with the aggressive US trade policy, the EU and China have been intensifying talks as never before in the past months. Even on their thorniest trade issue – the anti-subsidy duties on EVs in force since last October.
The first sign of rapprochement was Trade Commissioner Sefcovic’s trip to Beijing in late March, with discussions on how to improve and rebalance bilateral trade and investment relations. Soon after, in early April, the parties agreed to re-start negotiations on the duties on EVs. This time, with the purpose to replace them with a minimum import price, which would be less harmful for Chinese producers than paying a customs duty. The Commission also insists that, as part of a future agreement, Chinese EV companies should commit to advanced investments in the EU, including technology transfer.
The new round of negotiations was welcomed by German car companies, which are strongly exposed to the Chinese market and are keen on a relaxation of global trade hurdles.
On top of this, just yesterday it was reported that China is preparing to remove its sanctions against MEPs as an effort to revive a bilateral investment deal that has been frozen since then. Back in 2021, the EU adopted sanctions on certain Chinese entities over Xinjiang issue, and Beijing reacted by blacklisting 5 MEPs. In turn, the EU halted the ratification of the Comprehensive Agreement on Investment (CAI).
All of this does not mean a full EU-China realignment – the EU is still very concerned over Chinese manufacturing overcapacity and economic security, to quote just one divergence. Still, there seems to be new determination to solve some specific issues, and foster some stability on global trade.
Over on X.
Here, if you want to know more about what the EU is keeping off the table in talks with the US
On our radar.
1-2 May I Indian Commerce and Industry Minister Piyush Goyal is expected in Brussels to continue the FTA negotiations, which are expected to be concluded by the end of the year. The common need to navigate the US protectionism can help overcome disagreements.
15 May I EU trade ministers will continue discussions on the response to the US tariffs, but economic security and FTA negotiations are on the agenda as well.
What we’re reading.
The Global Economy Enters a New Era
IMF reduces its growth forecasts for the global economy from 3.3% to 2.8% in 2025. Trade war is the obvious reason, and the US and China will be the most affected from this slowdown. So far, IMF explains, global trade was quite resilient, and businesses were able to re-route trade flows when needed, but this adaption is becoming harder. To address these shocks, the IMF’s recommendations for the key countries is “do your homework” – the EU should spend more infrastructure, China boost domestic consumption, the US work on fiscal consolidation.
Hedging Chaos: How the EU, Japan and South Korea Can Shape a New Type of Trading Power
Export-driven economies, dependent on US security, facing worrying neighbours… the EU, Japan, and South Korea have lots in common. Cooperation is only natural, this Martens Centre paper argues, and will help create a hedge against greater US conditionality. The first step is to deepen sectorial economic partnerships by evolving and expanding existing trade agreements.
Antonio Pilati, Public Affairs Consultant