When will the EU do a deal with Trump?

China has wrapped up a pretty good trade deal. The UK has managed to agree to lift some of the US tariffs. With President Trump touring the Gulf states this week, they may soon have an arrangement in place, especially as Qatar took the precaution of gifting the president a new 747. Japan may well have something signed over the next few weeks. There is just one exception. Where is the EU’s deal?

Despite the panic last month, it looks like the global trading system will soon be back to relative normal. The US and China, the two largest economies in the world, have called a truce, lowering tariffs on both sides. The great ports on the Pacific can be re-opened and goods can start flowing in both directions again, even if the levies will be slightly higher than before. The Japanese press is reporting that there should be a deal in place by July at the latest, although there are still some sticking points on car imports. Even Britain’s Prime Minister Sir Keir Starmer managed to get a deal over the line with the President without conceding much of substance. 

But where is the EU? President Trump this week described the EU as ‘nastier than China’, and it has fallen to the back of the queue. And yet, the EU has more at stake than anyone else. It has a huge trade surplus with the US, worth €198 billion a year, to protect. And unlike China, which was still expected to expand even if it faced 145 per cent tariffs in the US, its economy is already facing stagnant growth. It can’t afford to face huge tariffs in the US. 

That is going to create two big problems. To start with, it will give other regions a competitive advantage. Japanese or British or indeed Chinese luxury cars will be a lot more attractive to wealthy Americans than German ones, and Scotch whisky more attractive than cognac. Across a whole range of industries, European companies will lose market share. Next, President Trump can’t lift all his tariffs without looking ridiculous. He will be tempted to keep at least some of them in place, or else the whole policy will look like a shambles. If it has fallen to the back of the queue, it will be the EU that gets singled out. After all, the US runs a huge deficit, it is clearly protectionist, and the US can get by perfectly well with fewer European imports. We keep being lectured on how the EU is a trading superpower, how its negotiators are the most skilled in the world, and how no one can ignore its economic might. But right now it looks like the main loser from the tariff wars.