The fate of an important trade deal between the European Union (EU) and the United States rests in one person’s hands: Donald Trump.
In Scotland, the high-stakes finale is about to take place. Ursula von der Leyen, President of the European Commission will be meeting with US President Barack Obama on Sunday to try and seal a final deal.
Race against time to avoid a storm of tariffs
Both sides are racing against time. A 30% tax on exports from the EU to the US will automatically be imposed on Friday if no deal is made.
Paula Pinho is the spokesperson for von der Leyen. She said that “intensive negotiations on technical and political issues have been underway.”
Now, leaders will take stock of their options and determine the best way to achieve a balance that is predictable and stable for both businesses and consumers.
EU officials have warned that despite their detailed negotiations, the final outcome is dependent on the approval of President Trump, which makes it notoriously hard to predict.
US President’s recent negotiation with Japan serves as a warning; it appeared that he changed certain final terms in the moment just before an agreement was reached earlier this week.
What is the structure of a possible deal? 15% tariffs, and important exemptions
In the last week, both the EU and US. The EU and the US have focused on a possible agreement’s framework.
Bloomberg reported that the EU would be likely to face a 15% base tariff on the majority of its US trade.
The EU, however, is pressing for exemptions that are limited, but vital, for certain sectors. These include aviation, generic drugs and medical devices, as well as several types of spirit.
According to the proposed arrangements, imports of steel and aluminium would benefit from a tariff system that would impose a 50% higher rate on imports over this threshold.
The new levy is in addition to the universal tax that President Trump had threatened as well as existing duties of 25% on autos and auto parts, and 50% on steel and aluminium.
He also announced that he would target semiconductors and pharmaceuticals as soon as the next month.
According to sources familiar with this matter, the EU expects the same ceiling of 15% to be applied to certain sectors in the future that may be targeted, such as pharmaceuticals. However, the final decision by President Trump will have a major impact on the issue.
Trump on high stakes games: ‘A 50% chance’
The negotiations have been a source of tension for President Trump.
He said, “We’ll have to see if there is a deal.” As he landed in Scotland Friday. “Ursula, a highly respected woman will be present.
We look forward to it.” He reiterated that there is “a 50% chance” for a deal to be reached with the EU. However, there are still “maybe twenty different things” which he didn’t want to reveal publicly.
He also recognized the importance of an agreement and said, “That’s actually the biggest of all deals if we can make it.” Prior to leaving Washington, the odds were similar but he suggested that the EU has a “pretty decent chance” of achieving an agreement.
A deal will likely take the form a brief joint statement that would need to be ratified by all EU member states.
The statement is a key step towards future detailed and comprehensive discussions.
A deal would likely also cover the non-tariff barrier, economic security issues, and strategic EU purchases in areas such as energy, artificial intelligence chips, and other sectors.
Europe’s plan B: A powerful arsenal of retaliation
Due to the uncertainty of the current negotiations and their unpredictable nature, the EU is simultaneously preparing a set of powerful countermeasures for a scenario of no deal.
The EU will quickly respond if talks fail and Trump follows through on his threats to apply a 30% tariff to most exports of the EU after August 1. The EU would impose up to 30 percent tariffs on US exports worth EUR100 billion (about 117 billion dollars) of goods.
The list was strategically designed in order to target politically sensitive US States. It includes products like Boeing Co. aircrafts, American-made automobiles, and Bourbon Whiskey. This package includes export restrictions for scrap metals.
In the event of a “no-deal” scenario, beyond immediate tariffs and retaliation, the EU is prepared to use its anti-coercion tool.
It is an effective trade tool which would allow the EU, if a majority supported its use, to eventually target other areas such as US market access, service restrictions, or public contracting.
Although President Trump didn’t explicitly tie the trade talks to any other issues on Friday, it was clear that he intended to express his concern over migration in Europe.
Trump stated that “you have to stop the horrible invasion” that is happening in Europe and many other countries. He also said that “this immigration will kill Europe”.
It adds a new element of uncertainty to discussions that are already high stakes.
As new information becomes available, this post Trump says EU Trade Deal has a 50-50 Chance of Success as Leaders Prepare for Sunday Meeting may be updated.
