Trump Pushes EU to Cut Tariffs or Face Extra Duties, FT Reports

U.S. Trade Representative Jamieson Greer is pressing the European Union to unilaterally slash its tariffs on U.S. goods or risk a fresh round of 20 percent “reciprocal” duties, according to the Financial Times. In talks with European Trade Commissioner Maroš Šefčovič, Greer is set to argue that Brussels’ latest “explanatory note” falls well short of Washington’s demands. With both sides at an impasse, the 90-day window—during which the U.S. halved its 20 percent tariff on most EU imports—expires on July 8, raising the specter of escalated trade retaliation (Reuters, Financial Times).

A Timeline of Tariff Escalation

1. March 12, 2025: The U.S. imposes 25 percent tariffs on all steel and aluminium imports, eliminating prior exemptions and mandating that metals be “melted and poured” (steel) and “smelted and cast” (aluminium) in the U.S. to qualify for duty-free status.
2. April 2, 2025: A 20 percent tariff is extended to all other EU goods, effective April 9.
3. April 7, 2025: The EU offers a “zero-for-zero” deal—proposing to eliminate all industrial goods tariffs (automobiles, machinery, pharmaceuticals) if the U.S. does the same.
4. April 9, 2025: Brussels suspends planned retaliatory tariffs on €21 billion of U.S. exports for 90 days; in turn, the U.S. cuts its 20 percent rate to 10 percent until July 8.

Despite these steps, both sides have yet to agree on a joint framework text, leaving major issues unresolved—ranging from automotive duties to digital taxes.

The U.S. Position: Unilateral Concessions or Consequences

According to FT sources, USTR Greer will deliver a clear ultimatum: unless the EU unilaterally lowers its levies on U.S. goods—beyond mere proposals for mutual cuts—negotiations will stall and the U.S. will reinstate the full 20 percent tariff on most non-steel/aluminium goods. This approach diverges from past U.S. practice of seeking reciprocal reductions; instead, the Trump administration is demanding concrete EU action up front, including:

• Immediate elimination of EU duties on U.S. cars, machinery, and chemicals.
• Rollback of the proposed EU digital services levy, which the U.S. views as a barrier to American tech firms.
• Acceptance of U.S. regulatory standards for agricultural and industrial products to facilitate market access.

The EU Response: Cooperation, but on Its Terms

Brussels has countered with calls for a jointly agreed negotiating mandate, emphasizing mutual respect for each side’s regulatory regimes. Key elements of the EU position include:

• Zero-for-zero offer on all industrial goods, covering €23 billion in U.S. exports, with the EU prepared to expand this scope if the U.S. reciprocates fully.
• Safeguards on sensitive sectors—such as agriculture and digital services—preserving EU consumer protections and data-privacy standards.
• Phased implementation, tying tariff cuts to benchmarks on market access, regulatory alignment, and dispute-resolution mechanisms.

Brussels argues that unilateral EU reductions—absent U.S. commitments—would undermine its single market integrity and offer U.S. exporters a free ride (Reuters).

Impact on Key Sectors

Automotive Industry

• EU car exports to the U.S. totaled €45 billion in 2024, with Germany alone accounting for over 70 percent of that figure.
  
• The 25 percent duty on vehicles, up from a long-standing 2.5 percent reciprocal rate, has disrupted supply chains, delaying U.S. deliveries of high-end sedans and luxury SUVs.
  
• OEMs such as BMW, Mercedes-Benz, and Volkswagen have publicly implored their governments to clinch a deal before the July deadline, warning of production slowdowns and job losses on both sides of the Atlantic.

Steel and Aluminium

• The 25 percent tariff on steel and aluminium imports aims to protect U.S. domestic producers, who now see their average effective tariff rate jump by 15.6 percentage points since March 2025 (The Budget Lab at Yale).
  
• Major European steelmakers ArcelorMittal and Thyssenkrupp have begun rerouting shipments to Asia and Africa to avoid U.S. duties, exerting downward pressure on global prices.
  
• The Biden administration’s successor has signaled openness to carve-outs for NATO allies—a potential crack in the Trump-era blanket approach—but no formal exemption has been granted to date.

Agriculture and Food Products

• U.S. beef and poultry exporters face a 20 percent levy, reversing tariff concessions secured in the 1990s.
• EU producers—especially in France and Spain—warn that any reinstatement of U.S. retaliatory duties could further inflate supermarket prices, sparking domestic political backlash.

Lessons from the UK Deal

In April 2024, the U.S. and the U.K. reached a limited auto tariff agreement, reducing duties on American cars from 2.5 percent to zero, in exchange for increased ethanol and beef imports from the U.K. While Brussels viewed this as a model, it remains reluctant to accept a “take-it-or-leave-it” package mirroring the U.K. terms, given the EU’s larger and more integrated market ‧(Financial Times).

International Legal and WTO Implications

If the U.S. fails to reach an agreement by July 8, it risks:

1. Full reinstatement of its 20 percent tariffs on all non-steel/aluminium EU goods.
   
2. EU countermeasures on up to €95 billion of U.S. exports, as outlined in Brussels’ contingency plans.
   
3. WTO disputes, with both sides likely to challenge each other’s measures. The U.S. has already lost several steel-related cases at the WTO during Trump’s first term, but the current administration appears willing to test the dispute-resolution system once again.

Potential Economic Fallout

• Consumer Prices: The Peterson Institute estimates that reinstating full U.S. tariffs could add US$2,000 per household annually in import price increases.
  
• Supply Chains: Global automakers may re-route production to avoid dual tariffs, accelerating a shift toward nearshoring in Mexico and Canada.
  
• Investment Climate: Prolonged uncertainty could dampen foreign direct investment into both the EU and the U.S. manufacturing hubs, with Moody’s warning of downward credit pressures on regional banks.

What’s Next?

• June 2025: Next round of ministerial talks in Paris, co-chaired by Greer and Šefčovič, will delve into technical working groups on automobiles, steel, and digital services.
• July 8, 2025: Deadline for the temporary tariff reduction, after which the U.S. may fully restore the 20 percent rate.
• Q3 2025: Possible EU counter-tariff implementation if no compromise is reached, targeting high-visibility U.S. exports such as motorcycles, whiskey, and coal.

Observers believe a last-minute breakthrough remains possible—driven by industry lobbying and high-level political engagement—but the path to a comprehensive deal is narrow.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

23rd May, 2025