EU and US trade negotiators meet in Paris as tariff storm intensifies

Good morning. When it comes to European political instability, it never rains but it pours: Far-right leader Geert Wilders brought down the Dutch government yesterday, turning its Prime Minister Dick Schoof into a caretaker premier. Our Netherlands correspondent explains what it all means in this analysis.

Today, we preview this afternoon’s trade war showdown in Paris between the EU and US’s top negotiators, and I report on a demand from a phalanx of EU defence ministers for Brussels to launch an air strike on red tape holding back their armies.

Maroš in Paris

Another day, another notch up on the trade war scale, as EU and US negotiators meet in Paris to try to resolve their burgeoning tariff stand-off, writes Andy Bounds.

Context: US President Donald Trump overnight doubled tariffs on steel and aluminium from 25 to 50 per cent to protect domestic producers. That is in addition to “reciprocal” US tariffs of 50 per cent on EU goods set to kick in on July 9 if there is no trade deal with Brussels.

Today’s increased metals levies happen to coincide with a meeting between EU trade commissioner Maroš Šefčovič and US trade representative Jamieson Greer, on the margins of the OECD ministerial in Paris.

Neither side wished to discuss the negotiations in advance. But two European Commission officials said that unlike some countries, Brussels had not received a letter from Greer asking to send final negotiating offers for a potential trade deal by today.

Commission trade spokesperson Olof Gill did say this week that the new metals duties “undermine our ongoing efforts to reach [a] negotiated solution . . . We strongly regret the announced increase”.

A majority of EU exports, worth €380bn a year, are already subject to 10 per cent tariffs, with cars and parts at 25 per cent. 

When Trump last month increased the threatened level to 50 per cent, Brussels agreed to accelerate talks.

According to three EU diplomats, Brussels has also offered more concessions, although it expects the 10 per cent baseline tariff to remain in place.

The bloc has paused its retaliation against steel measures, a €21bn package of up to 50 per cent tariffs on US goods such as maize, wheat, motorcycles and clothing, but has said it will adopt countermeasures if negotiations do not lead to a balanced outcome.

Member states are also discussing a list of €95bn of other US goods that could be hit in response to Trump’s “reciprocal” duties, including Boeing aircraft, cars and bourbon whiskey.

“Both these and existing countermeasures will automatically take effect on July 14 — or earlier, if circumstances require,” Gill said.

Šefčovič has a busy schedule in Paris, including meetings with ministers from India and Thailand, both of which are negotiating trade agreements with Brussels.

Today he saw Wang Wentao, China’s commerce minister, to talk about escalating tensions between Beijing and Brussels. 

Chart du jour: ‘They think they are Italian’

Italians will soon vote on whether to ease immigration rules and give long-term, legal migrant workers and their children a faster path to citizenship.

Guns vs butterflies

Brussels must launch an offensive against EU legislation holding back the bloc’s armed forces, a group of EU defence ministers have ordered, demanding that a cross-sector simplification drive be expanded to the military.

Context: Russian President Vladimir Putin’s war against Ukraine has sparked a major rearmament of Europe. Simultaneously, the European Commission has vowed to cut back regulation that is hampering the bloc’s economic competitiveness.

Eleven defence ministers, led by the Netherlands’ Ruben Brekelmans, have called for defence to get its own so-called deregulation “omnibus”, which would “address the legal obstacles for operational readiness of our armed forces and defence organisations, in addition to addressing legal obstacles to the defence industry.”

“Some EU legislation forms a direct obstacle to the armed forces for fulfilling their tasks,” states a letter sent to EU defence commissioner Andrius Kubilius and seen by the FT.

“EU legislation may not prevent Member States’ armed forces from carrying out necessary activities to become operationally ready. But right now, it does,” states the letter also signed by the defence ministers of Germany, Belgium, Sweden, Czech Republic, Romania, Finland, Denmark, Estonia, Latvia and Lithuania.

The restrictions are “mainly (but not exclusively) in the areas of procurement legislation, nature conservation and environmental protection, and more generally the administrative burden on defence organisations deriving from various EU legal acts”, they write.

“The EU should cut the red tape preventing us from going faster and being better than any adversary,” Brekelmans said earlier this year.

“Of course the environment is important and should be protected. But Putin won’t be deterred by a sign warning him that he’s about to enter a nature reserve,” he said.

What to watch today

1. Nato secretary-general Mark Rutte meets French President Emmanuel Macron in Paris.

2. European Commission to present European Semester economic package.

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