President Donald Trump today announced he’s levying tariffs of 30 per cent against the European Union and Mexico starting August 1.
Trump announced the planned tariffs on two of the United States’ biggest trade partners in letters posted to his social media account. They are part of an announcement blitz by Trump of new tariffs with allies and foes alike, a bedrock of his 2024 campaign that he said would set the foundation for reviving a US economy that he claims has been ripped off by other nations for decades.
In his letter to Mexico’s leader, Trump acknowledged that the country has been helpful in stemming the flow of undocumented migrants and fentanyl into the United States. But he said the country has not done enough to stop North America from turning into a “Narco-Trafficking Playground.”
“Mexico has been helping me secure the border, BUT, what Mexico has done, is not enough,” Trump added.
Trump in his letter to the European Union said that the US trade deficit was a national security threat.
“We have had years to discuss our Trading Relationship with The European Union, and we have concluded we must move away from these long-term, large, and persistent, Trade Deficits, engendered by your Tariff, and Non-Tariff, Policies, and Trade Barriers,” Trump wrote in the letter to the EU. “Our relationship has been, unfortunately, far from Reciprocal.”
EU responds
European Union Commission President Ursula von der Leyen responded by noting the bloc’s “commitment to dialogue, stability, and a constructive transatlantic partnership.”
“At the same time, we will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required,” von der Leyen said in a statement.
Trump, as he has in previous letters, warned that his administration would further raise tariffs if the EU attempts to hike its own tariffs on the United States.
With the reciprocal tariffs, Trump is effectively blowing up the rules governing world trade. For decades, the United States and most other countries abided by tariff rates set through a series of complex negotiations known as the Uruguay round.
Countries could set their own tariffs – but under the “most favored nation’ approach, they couldn’t charge one country more than they charged another.
The Italian Government said on Saturday it continues to “closely monitor” the ongoing trade negotiations between the European Union and the United States, fully supporting the EU Commission’s efforts.
“We trust in the goodwill of all stakeholders to reach a fair agreement that can strengthen the West as a whole, given that—particularly in the current scenario—it would make no sense to trigger a trade war between the two sides of the Atlantic,” Premier Giorgia Meloni’s office said in a statement.
The Mexico tariff, if it goes into effect, could replace the 25 per cent tariffs on Mexican goods that do not comply with the existing US-Mexico-Canada free trade agreement.
Trump’s letter did not address if USMCA-compliant goods would still be exempt from the Mexico tariffs after Aug. 1, as the White House said would be the case with Canada. Trump sent a letter to Canada earlier this week threatening a 35 per cent tariff hike.
Higher tariffs had been suspended
With Saturday’s letters, Trump has now issued tariff conditions on 24 countries and the 27-member European Union.
The European Union’s chief trade negotiator said earlier this week that a trade deal to avert higher tariffs on European goods imported to the US could be reached “even in the coming days.”
Maroš Šefcovic told EU lawmakers in Strasbourg, France on Wednesday that the EU had been spared the increased tariffs contained in the letters Trump sent on Monday, and that an extension of talks would provide “additional space to reach a satisfactory conclusion.”
The bloc collectively sells more to the US than any other country. US goods imports from the EU topped USD 553 billion in 2022, according to the Office of the US Trade Representative.
Trump on April 2 proposed a 20 per cent tariff for EU goods and then threatened to raise that to 50 per cent after negotiations did not move as fast as he would have liked. Sefcovic did not mention any tariff figures.
The higher tariffs as well as any EU retaliation had been suspended as the two sides negotiate. However the base rate of 10 per cent for most trade partners as well as higher rates of 25 per cent on autos and 50 per cent on steel and aluminum had gone into effect.
Douglas Holtz-Eakin, a former Congressional Budget Office director and president of the centre-right American Action Forum, said the letters were evidence that serious trade talks were not taking place over the past three months. He stressed that nations were instead talking amongst themselves about how to minimize their own exposure to the US economy and Trump.
“They’re spending time talking to each other about what the future is going to look like, and we’re left out,” Holtz-Eakin said.
He added that Trump was using the letters to demand attention, but, “In the end, these are letters to other countries about taxes he’s going to levy on his citizens.”
Potential impact is vast
If the tariffs do indeed take effect, the potential impact on Europe could be vast.
The value of EU-US trade in goods and services amounted to 1.7 trillion euros (USD 2 trillion) in 2024, or an average of 4.6 billion euros a day, according to EU statistics agency Eurostat
Europe’s biggest exports to the US were pharmaceuticals, cars, aircraft, chemicals, medical instruments and wine and spirits.
Trump has complained about the EU’s 198 billion-euro trade surplus in goods, which shows Americans buy more goods from European businesses than the other way around.
However, American companies fill some of the gap by outselling the EU when it comes to services such as cloud computing, travel bookings, and legal and financial services.
The US services surplus took the nation’s trade deficit with the EU down to 50 billion euros (USD 59 billion), which represents less than 3 per cent of overall US-EU trade.
Before Trump returned to office, the US and the EU maintained a generally cooperative trade relationship and low tariff levels on both sides. The US rate averaged 1.47 per cent for European goods, while the EU’s averaged 1.35 per cent for American products. (AP)
