EU Trade Commissioner Maros Sefcovic is visiting Washington to try to make a deal that would shield the block from hefty tariffs.Benoit Tessier/Reuters
The art of the deal seems to be evolving into the art of the half-deal.
When President Donald Trump three months ago announced a July 9 deadline for countries to negotiate trade deals with the United States or face tariffs of as much as 50 per cent, the European Union faced an industry-busting crisis. Tariffs that high would shatter key export sectors, including cars, pharmaceuticals and machinery, inevitably pushing the 27-country bloc into recession.
Certainly, the EU would take more of a battering than the U.S. if the transatlantic trade war were to go nuclear. In 2024, the EU’s goods trade surplus with the U.S. reached US$236-billion, up 13 per cent over the previous year, according to the Office of the U.S. Trade Representative (though the U.S. has a fairly hefty services surplus with the EU). Were the EU to see the goods surplus vanish, tens of thousands of skilled jobs would also vanish, possibly triggering social unrest; the tax base would erode.
On Wednesday, with the deadline hanging over the EU like the Sword of Damocles, EU Trade Commissioner Maros Sefcovic was in Washington to try to bash out a deal that would shield the bloc from punishing, double-digit tariffs – his greatest career challenge. He is set to return to Brussels on Friday to deliver the good or bad news.
For some time, European Commission President Ursula von der Leyen has been pushing a “zero-for-zero” tariff regime, meaning that Brussels and Washington would, in time, eliminate tariffs on industrial goods. The Trump White House has rejected the idea for fear that a true free-trade agreement would only widen the U.S.’s trade deficit with the EU.
What seems likely is a quasi-deal designed to buy time and kick the sensitive issues, like trade in pharmaceuticals, down the road. Already, the EU has signalled it will back down, but only somewhat, by accepting a 10-per-cent baseline tariff as long as there are reduced rates on key industrial sectors, such as aviation (Europe’s Airbus sells a lot of passenger jets in the U.S.) and semiconductors.
The ploy may or may not work; it would have a better chance of success if the EU were to toss Mr. Trump a few non-tariff-barrier bones, such as scrapping the idea of taxes on U.S. digital tech’s advertising revenue or diluting the EU biosecurity standards so Europeans can fill their dinner tables with American chlorinated chicken. Canada dropped the digital services tax a few days ago to restart trade negotiations with the U.S., which had been cancelled by Mr. Trump.
Already, there are signs that the July 9 deadline, at least with the EU and a few other countries, will in effect slip. U.S. Treasury Secretary Scott Bessent has said the White House would “highly likely” delay imposing punishing tariffs on any countries negotiating trade deals “in good faith.” Mr. Trump himself has sent out mixed signals. Last Friday, he said “we can extend” the deadline. A few days later, he said the opposite.
A lot can happen between now and July 9. In a note published Wednesday, ING Economics said that U.S. protectionism “is still the name of the game” but that, in some cases, deadline extensions will be granted. That appears to be the case with the EU, with some sort of trade outline, but not a final deal, likely to be unveiled next week.
But so what if the U.S. and the EU strike a deal, even half a deal, next week?
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Mr. Trump is not negotiating true trade agreements. Only Congress can approve big trade deals, such as USMCA (United States-Mexico-Canada Agreement, the successor to NAFTA). He instead is using executive orders to move U.S. tariffs up or down, delay them or impose new ones. The tariffs are often launched under the guise of national security. In May, a U.S. federal court, the Court of International trade, ruled that Mr. Trump had overstepped his authority by imposing tariffs under the International Emergency Economic Powers Act. The case is expected to reach the Supreme Court.
As Canadian trade lawyer Lawrence Herman notes, “because these are executive agreements only, not approved by Congress, they’ll be hostage to future changes in Trump’s temperament.”
You can see where this is going. The EU and the U.S. (or Canada, Japan, China and the U.S.) will announce some sort of trade deal at some point. Then Mr. Trump will wake up in a bad mood and kill the deal, or parts of it. After a bout of market turmoil and recriminations, negotiations will start afresh. Repeat until he leaves office in 3½ years. In the Trump era, being a trade negotiator is a never-ending, exasperating job.