Last Moments to Negotiate Peace in Donald Trump's Trade War with Europe

July 9, when President Donald Trump suspended punitive U.S. tariffs on goods from the European Union and much of the world (but not Russia) for 90 days, is approaching. Next week, we will see the second chapter of the tariff war unleashed on April 2 by the 47th president of the United States after a historic press conference in the Rose Garden of the White House.

So far, Europe has not concluded any final agreement with the United States, and the words of representatives of the European Commission indicate that negotiations are ongoing, have only recently accelerated and will probably continue until the last minute: - We are working on an agreement, our team of negotiators flew to the US on Monday, they will be there all week, today they were joined by the Commissioner for Trade Maroš Šefčovič, he will have meetings on Thursday, he will return to Brussels on Friday - we heard from an employee of the EU Directorate-General for Trade (DG Trade).

Americans are becoming more willing to talk on the home stretch

– We wanted to abolish the universal 10% rates that have been in force for everyone since April, and meanwhile we are again threatened with penalty rates, which were initially 20%, and now Trump has even spoken of 50%, because “the EU has upset him”. In his opinion, the negotiations are proceeding too slowly – says another expert familiar with the subject, associated with DG Trade.

This is of course not the first negotiation meeting, there have been several such talks in recent months. - If we fail to reach an agreement, it will not be because of our side, because we have had the same position from the beginning. It is the Americans who are unpredictable, unstable. At the beginning they were not very involved in the talks, but this has changed in the past month - says our interlocutor at DG Trade.

Why have the Americans changed their minds in the past month? "After all, we, the EU and the US, are each other's largest trading partners. Our trade flows amounted to $1.7 trillion last year, so they cannot afford to lose such opportunities," we hear in the European Commission. "I hope there will be some advisers who will tell Trump that what he is doing is crazy. But that is just a hope. July 9, next week..." says an expert from the Commission.

The EU has been aiming for "zero for zero" from the start, meaning zero rates on both sides. At the same time, however, the EC is also working on potential retaliatory measures, on a detailed list of US goods that will be subject to tariffs in the EU. "Consultations on the list of products ended on June 10. Now we are finalizing work on this list. Consultations are still ongoing at the political level," says our first interlocutor from DG Trade.

What scenarios lie ahead for the EU?

- Today's situation is a balance of all the interdependencies between Europe and America. We allowed ourselves to be dependent on the Americans, we did not foresee that they could ever become such a challenge - Dr. Małgorzata Bonikowska, president of the Center for International Relations, tells "Rzeczpospolita". She notes that the EU is currently considering several scenarios, because it is really not known what Trump's intentions are. - The best thing for Europe would be if they reached an agreement. The EU is even willing to accept additional tariffs to maintain a common front towards China, which would allow for maintaining close relations and trade, while also maintaining low tariffs - Dr. Bonikowska points out.

The second option, in her opinion, assumes that tariffs will remain at a fairly low level, but that the current "sympathy and cooperation" between the countries will collapse. The third option: Europe will not reach an agreement with the United States and we will have a return to blocking tariffs that reduce the sense of trade across the Atlantic. Finally, the fourth scenario assumes that someone will buy time and the negotiations will be prolonged.

The problem is that while Europe could respond painfully to the United States on trade, the US holds us in check with technology and defence. The war in Ukraine complicates the situation, of course, but the problem is also Europe's technological dependence on the US. Which is a bitter sobering thought for EU leaders .

- Europe did not do what China did and now regrets that it became dependent on the US. We took everything that flowed from Silicon Valley with the benefit of inventory. When the pandemic came, it turned out that Europe did not have any platforms. We could use either Chinese Zoom or US inventions, from Teams to Webex. Today we know about it, we want to become independent, but we cannot afford to break ties now. We have to grit our teeth for 10 years and build advantages - explains Dr. Bonikowska.

Profits in the EU, taxes in the US

Another bone of contention is taxes on companies that operate almost exclusively virtually in Europe but send the real money they earn here to the United States.

- Europe is also unhappy that for American technology companies it is mainly a place to sell services. Facebook or Google do not have to invest in local production, they are not rooted here, there are no major investments here, so the money, taxes go to the US, even though the companies operate in Europe. In the case of big tech and the tax that Europe is working on, it is about services that do not require investment here. Europeans want to have a greater benefit from the fact that Americans operate in Europe and they want big tech to pay taxes here - explains Dr. Bonikowska.

Chlorinated chickens are a bone of contention

What else is an obstacle to reaching an agreement? Another expert, a long-time high-level employee of DG Trade, reminds us that chickens are also a bone of contention. For years, the Americans have wanted to impose their lower food production standards on the EU. "There is no way that we, as the EU, would agree to the import of chlorinated chicken or meat produced using hormones. The Americans chlorinate meat, and we do not recognize such processing in the EU. Can you imagine what would happen if we gave up on these conditions? Our consumer protection would collapse," says our interlocutor.

The tariff war was announced by Donald Trump during a conference on April 2, which he called "liberation day". He announced then that from April 5, the US would impose 10% tariffs on imports from all countries. Then, from April 9, "reciprocal tariffs" for individual countries would come into effect. In the case of the EU - 20%. Much more volatile rates were in the case of China: initially 34%, then rose to a record 145%, and then were reduced. Trump imposed similarly high tariffs on other Asian countries. Two days ago, the US concluded its first agreement on tariffs - with Vietnam.