00:00This is apropos. Absolutely unacceptable. That's the verdict from EU trade ministers after Donald Trump said he'd be imposing tariffs of 30% on the European Union from next month.
00:15Brussels is accusing the United States of resisting efforts to strike a trade deal and warning of countermeasures if no agreement is reached between now and the 1st of August.
00:25The European Union is choosing negotiation over retaliation, at least for now.
00:34In Brussels, the EU Commission president said hard-hitting retaliatory tariffs on US goods won't come into force next week as planned, and instead only activated if a deal can't be reached.
00:45We have always been very clear that we prefer a negotiated solution. This remains the case, and we will use the time that we have now till the 1st of August.
00:57Since the very beginning, we have worked and now are ready to respond with countermeasures. We've prepared for this, and we can respond with countermeasures if necessary.
01:09Brussels was blindsided by Trump's Saturday announcement of a 30% blanket tariff on imports from the EU, starting August 1st, which he blamed on the trade imbalance in goods with Europe.
01:21The French president has called for a show of force against Trump, including considering deploying its anti-coercion instrument, or trade bazooka if required.
01:31With European unity, it's more than ever up to the Commission to assert the Union's determination to resolutely defend European interests.
01:39In particular, this implies speeding up the preparation of credible countermeasures by mobilizing all the instruments at its disposal, including anti-coercion, if no agreement is reached by August 1st.
01:52Brussels has ramped up efforts to forge new agreements with South American and Asian trading partners following Washington's global trade war.
02:01The EU is the world's largest trading bloc and America's biggest trading partner.
02:05With its top exports to the U.S. being pharmaceuticals, cars, aircraft, chemicals and wine and spirits.
02:14Well, for more, let's bring in Gavin Bade, a reporter specializing in trade and economic policy at The Wall Street Journal.
02:21Gavin, thanks so much for being with us this evening.
02:23So, the markets, most of them, they appear to be essentially shrugging off Donald Trump's latest tariff threats towards the EU and Mexico.
02:31So, is this simply another negotiating ploy?
02:35What is Donald Trump planning to do here?
02:37Is it possible to say?
02:40I think it's impossible to say for certain, but certainly that's how the markets are taking this.
02:45And that's the feeling in Washington around Capitol Hill is this is just the latest negotiating tactic from Trump.
02:51You know, he's seen a lot of outlines from trade deals, we understand.
02:55And he's directed his staff to go back and make one final push to get the the best provisions that he can from his perspective.
03:02And so just to jack up the pressure, you know, he did kick off the, you know, push back the deadline to institute these tariffs by three weeks.
03:10And I think to kind of increase the pressure at the same time, he started writing these letters, upping the ante in these negotiations.
03:16So, some some heady days to come of talks between different trading partners.
03:21How real is the risk then that these tariffs are going to be imposed in a couple of weeks time then?
03:26I think it's certainly real that we will see tariffs snap back into place if we don't see some sort of deal between the US and the EU and other economies.
03:35That being said, you know, there will probably be tariffs on the EU even if there is some sort of deal.
03:41They'll just be at a lower level.
03:42I think President Trump has been adamant that every country was at least going to see a 10 percent baseline tariff and then separately would face automotive tariffs and other industry specific tariffs.
03:53So, certainly some level of tariff increase is coming.
03:57I think we're just haggling over how much that's going to be right now.
04:00And in terms of the haggling then, how do you think the EU should respond?
04:03Not all nations are agreed what they should do next.
04:06France, for example, among those calling for kind of firmer countermeasures against the US.
04:12Yeah, I think maybe in this case it's good to have a good cop, bad cop situation going on with the EU where you can have Ursula von der Leyen delay the official retaliation and then have kind of the scepter of the anti-coercion mechanism that Macron wants to institute or at least think about using.
04:31I think it's probably a smart thing at this point to not retaliate against Trump.
04:35If he has kicked the deadline out, then maybe it's smart to extend as well, see if you can come to a deal.
04:41But there's going to be a time, we're going to come to a moment where we simply can't extend a deadline anymore.
04:46And I think it's anyone's guess as to what happens at that point.
04:49Thinking back to April, we saw a lot of market chaos when the reciprocal tariffs were actually in place for a week.
04:56So, hopefully cooler heads can prevail here.
04:58How much pressure is Brussels coming under, though?
05:02You know, it's facing potentially a huge economic blow, particularly when it comes to certain industries like, you know, car industry, pharmaceuticals, consumer industry.
05:10And even within Europe, different countries are going to be affected differently.
05:13And I think it's a big task for the European Commission for Ursula von der Leyen to wrangle all those cats and get all those economies together to agree to a deal.
05:25Obviously, there's a lot of different interests in the 27 member states and some people who may, some of them may be more amenable to a deal and others may not be.
05:33We already see with Macron wanting to take a harder line.
05:35So, there's going to be a variety of negotiating tactics within the bloc as well as, you know, between the two governments.
05:41I think it's a very challenging thing.
05:43And how many countries actually have succeeded at this point in reaching a deal with Trump?
05:49And how have they managed to appease him?
05:53Well, success is a relative term here.
05:55We kind of have two and a half or three deals.
05:57You know, the U.S. and the U.K. signed a narrow trade agreement.
06:01It's not legally binding.
06:03But Trump did give them a little bit of a break on the automotive tariffs and on steel and aluminum, although the details are still being worked out there.
06:11Then we saw a trade.
06:13We could call it a tariff truce with the Chinese.
06:16This was the deal back in Geneva in May that lowered the tariffs.
06:20The U.S. tariffs had got up to an eye-watering 145 percent.
06:24We lowered that down to around from 40 to 50 percent, depending on the product line.
06:29And the Chinese did lower their tariffs reciprocally as well.
06:34So, that deal is still being negotiated.
06:36There's been twists and turns there.
06:38We've not seen any text.
06:39There's been no documents released about it.
06:42So, we have to kind of take them at their word.
06:44And it's a similar situation with Vietnam.
06:46You know, two weeks ago, Trump put out a post on Truth Social saying he had agreed to a trade deal with Vietnam.
06:52And since then, we have reported and others have reported that the details are not all worked out.
06:56We haven't seen any paper, no documents from that deal.
06:59It's really just that one Truth Social press release that we have as evidence that there actually is something behind this.
07:06So, I think it's been slow going for the administration in many of these negotiations.
07:11And, Gavin, what do you make of Trump's latest comments about Russia threatening to impose tariffs there if the war with Ukraine doesn't end in 50 days,
07:19saying that trade is great for settling wars?
07:24Yeah, a very vague, if serious, threat.
07:27Trump was speaking at a White House event earlier today when he was with the NATO Secretary General.
07:32And he said, we will put 100% tariffs on Russia if they don't end the war within 50 days.
07:38The White House that was playing cleanup after and then saying, okay, well, he meant either tariffs or sanctions.
07:45And then the Commerce Secretary said, well, these might be secondary tariffs that would apply to countries that trade with Russia,
07:52that buy Russian oil, for instance.
07:54Then you're opening the door for much higher tariffs on the Chinese economy, for instance, the Indian economy,
08:00if these are indeed secondary tariffs.
08:03Like a lot of other things we've talked about in this discussion, there's no document, there's no plan that's been released,
08:08there's no press release, it's just Trump's kind of off-the-cuff comments.
08:12And it's been difficult to get any clarity from the White House about what this means.
08:16Now, sometimes that's the way Trump likes it.
08:18He uses ambiguity as a negotiating tool to kind of keep his adversaries off balance.
08:25But at some point, you need to come true with one of those threats or you start to lose a little bit of negotiating leverage and credibility.
08:35So I think it remains to be seen how this threat evolves in the weeks to come here.
08:39And you've written as well about how Trump has used punitive duties over other countries,
08:44you know, regarding matters that, again, have nothing to do with economics or trade.
08:47You cite the case of Brazil and former President Jair Bolsonaro.
08:51Yeah, so last week, President Trump issued one of his tariff letters threatening 50 percent tariffs on Brazil,
08:59principally because he said that the Brazilian legal system has treated Jair Bolsonaro, the former right-wing president, very, very unfairly.
09:07Now, remember that Bolsonaro is on trial at Brazilian Supreme Court right now for his role in fomenting an insurrection at the Brazilian capital in 2023.
09:15Trump, knowing something about insurrections, has a lot of sympathy for Bolsonaro and referenced this in his letter,
09:22saying that if they didn't, if they didn't, quote, leave Bolsonaro alone, he would institute these tariffs.
09:28And this just marks a huge break in in economic policymaking from really the last 50 years.
09:34The U.S. and other Western nations had worked very hard to come to agreements that would take tariffs out of the political realm
09:43and make them just narrower tools of economic policy.
09:46Now Trump has ripped all of that up, the general agreement on tariffs and trade, all of the WTO agreements.
09:52None of that matters to him anymore.
09:53He sees tariffs as a hammer and he sees every global problem as a nail.
09:57And I think this is just the latest kind of expansive use or expansion of the use of tariffs for matters that have nothing to do with trade.
10:06And, Gavin, you say success is a relative term when we're talking about all this.
10:09But is Trump overall succeeding in the objectives, whatever they may be, when it comes to these tariffs?
10:15Is there actual evidence that these measures are raising revenue or encouraging firms to relocate or to move back to the U.S.?
10:23They're certainly raising revenue.
10:26We're bringing in tens of billions of dollars every month in these tariffs.
10:30I think the answer to the second question, are firms reshoring to the United States, is a much more uncertain one.
10:38We've seen a lot of stagnation in dealmaking, although we've seen some residual investments coming in.
10:44But every business leader I talk to says, you're not going to make a multibillion-dollar investment if you are a trade-reliant company in the U.S.
10:53when you don't know what the tariff rate is going to be.
10:55And so I think we have yet to see all of the impacts filtered through the economy.
11:00A lot of companies are still offloading inventory that they have that they did not pay tariffs on.
11:06But I think we're going to start seeing price increases over the next few months here.
11:10And that will really be a sticking point for Trump in months to come.
11:15Well, Gavin, we'll have to leave it there for now.
11:16Thanks so much for being with us on the program.
11:18It's a very interesting conversation.
11:19That's Gavin Bede, reporter specialising in trade and economic policy at The Wall Street Journal.
