Disagreements within the EU are hindering the progress of US

Negotiation at a Critical Stage: EU Stance Divided

US-EU trade negotiations are Foreign exchange Trading and Fund Management Second Editionat a critical juncture, but EU member states show clear differences in strategy towards the US, hindering progress. Export-oriented economies like Germany and Italy want to expedite talks to ensure stability for their export industries, while France, Spain, and Denmark are concerned that concessions could harm their national interests, making it difficult for the EU to form a unified position.

Trump has clearly stated he will soon decide whether to impose punitive tariffs on European goods, which, if implemented, would heavily burden transatlantic businesses and consumers, further intensifying market concerns over global trade tensions.

Trump Threatens Tariffs, EU May Respond Strongly

Previously, Trump expressed dissatisfaction with the EU's stance in negotiations and threatened to increase tariffs on certain European goods to 50%, including French cheese, German electronics, Italian leather goods, and Spanish pharmaceuticals, which could significantly raise their prices in the US.

In response, the EU has prepared counter-tariffs on US products, targeting beef, beer, auto parts, and Boeing planes, potentially causing significant cost increases and market share loss for American exporters.

EU statistics show that the total trade in goods and services between the US and EU is expected to reach €1.7 trillion in 2024, with daily transactions exceeding €4.6 billion, indicating a close economic relationship.

Businesses and Economy Face Significant Impact

Structurally, the US's main exports to Europe include crude oil, pharmaceuticals, and aircraft, while Europe exports pharmaceuticals, automobiles, chemicals, and wine to the US. According to the US Trade Representative, the US had a trade deficit of €157 billion with the EU in 2023 for goods, though there was a surplus in services trade, the overall deficit remains notable.

Economists point out that high tariffs will directly raise the price of imported goods in the US, forcing importers to choose between absorbing the taxes or passing some costs to consumers, possibly leading to higher domestic prices and narrowed profit margins for businesses.

US dealers of Germany's Mercedes-Benz have stated they will pause sales of new 2025 models to observe the situation, predicting a significant increase in US market prices.

Simon Hunt, CEO of Italy's Campari Group, also warned that prices of wine and spirits in the US might rise, depending on market competition dynamics and changes in supply chain costs.

High Tariffs Risk Double Loss for Economies

Holger Schmieding, chief economist at Germany's Berenberg Bank, noted that the EU cannot easily concede on key issues of market regulation, and the US's misunderstanding of the EU's internal management complicates breaking the negotiation impasse.

A simulation report from the Bruegel think tank shows that if Trump imposes tariffs of 10%-25% on European imports, the EU's GDP would fall by 0.3%, while the US's GDP could decrease by 0.7%, indicating that a high tariff policy would result in a lose-lose situation.

Negotiation Outcomes Affect Global Markets

With high uncertainty in US-EU trade conditions, the final implementation time and tariff rates will impact global market sentiment and corporate investment decisions. If negotiations collapse and escalate into a trade war, global supply chains may suffer further damage, prompting investors to pay attention to the EU's negotiation stance, US policy direction, and tariff execution pace to navigate potential market fluctuations and risks.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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