[Text/Observer Network Xiong Chaoyi] On May 25 local time, European Commission President Ursula von der Leyen proactively contacted US President Donald Trump by phone, and Trump agreed to delay the threat of a 50% tariff increase on the EU and extend the Sino-US trade negotiations until July 9.

The Financial Times reported on May 28 local time that although the market was optimistic about the progress of the Sino-US negotiations, EU senior officials privately painted a bleak picture of the negotiations. EU trade negotiators admitted that they were unlikely to overturn Trump's "reciprocal tariffs," and warned European governments that larger concessions would be needed to avoid a full-scale trade war.

Despite the negotiators' hope to reduce tariffs, according to EU officials and diplomatic sources, the European Commission has informed member states that Trump's policy of imposing a 10% "reciprocal tariff" on almost all goods may continue. This assessment marks a significant change in the EU's attitude toward the negotiations. Previously, unlike the UK, the EU refused to make unilateral concessions simply to limit tariffs to the 10% "baseline tariff."

Three diplomats said that France was the only EU country to oppose unilateral concessions and accept a 10% tariff, while several other member states previously held similar positions. European officials and diplomats said that faced with the market's failure to constrain Trump's tough trade policies as expected, the EU was facing a dilemma: either compromise or retaliate.

European Commission President Ursula von der Leyen and French President Emmanuel Macron BBC

On April 2 local time, Trump announced the so-called "reciprocal tariffs," raising tariffs on EU countries to 20%. A few days later, Trump announced a 90-day moratorium on taxing most countries, during which a 10% "baseline tariff" would remain in place.

The Financial Times reported that this tariff threat affected approximately 70% of the EU's exports, equivalent to €38 billion worth of goods. The US side, however, insisted that the 10% rate is not part of the trade negotiations.

According to people familiar with the meeting, despite Trump's willingness to delay the imposition of the most punitive tariffs after his conversation with von der Leyen, Björn Seibert, her chief of staff, gave a pessimistic assessment of the negotiations to EU ambassadors on May 26.

In light of the US position, Seibert drafted a possible agreement that included elements of the deal reached between the UK and the US. He stated that the minimum requirements for reaching an agreement might include reducing tariffs on sensitive export products such as automobiles or setting zero-tariff quotas, as these products are currently taxed at 25% under the pretext of "national security." Additionally, Trump threatened to impose similar measures on semiconductors, pharmaceuticals, and other products.

A European diplomat said: "We must strive to do better." However, these EU negotiators admitted that if more ambitious goals were to be achieved, the EU would need to take countermeasures against the US. "Trump has no interest in a negotiated solution; he wants us to either surrender or face punitive tariffs."

As part of offering concessions to the US, the EU also plans to propose deregulation and expand the scope of recent reforms aimed at reducing administrative burdens on businesses. These measures can be presented to the Trump administration as "beneficial to American businesses." Diplomats said it remains unclear whether Seibert intends to expand the scope of the EU's deregulation plan or merely repackage existing measures within the context of the trade negotiations.

It was reported that French and German leaders have called on the European Commission to repeal a supply chain directive that requires large enterprises to be responsible for the emissions and labor practices of their suppliers, a major concern for the US. Most EU member states also hope to cancel new regulations on verifying the origin of goods from "low-risk" countries like the US, which originally required checking whether goods came from deforested land.

The Financial Times reported that Italian Prime Minister Giorgia Meloni strongly opposed any tariffs and played a key role in the negotiations. This right-wing Italian prime minister has good relations with Trump.

Currently, Rome still supports the mutual elimination of all industrial products and some agricultural products between the US and the EU. However, EU ambassadors were told that the US was uninterested in this. Officials said that the EU might unilaterally reduce some import tariffs. Other US demands include: eliminating digital taxes and value-added taxes, and modifying food standards to allow more US products into the market.

Seibert clearly stated that if negotiations fail, the EU should prepare for countermeasures. During the negotiations, the EU postponed the implementation of a €21 billion retaliatory plan - imposing up to 50% tariffs on US goods such as corn, wheat, motorcycles, and clothing, intended to retaliate against Trump's steel tariffs.

Currently, the European Commission is seeking opinions from member states regarding another retaliatory list worth €9.5 billion, covering Boeing aircraft, cars, bourbon whiskey, etc., aimed at responding to Trump's "reciprocal tariffs." Some member states advocate taking a tougher stance, believing this could pressure Trump to yield. An EU diplomat said: "Politically, it is unacceptable for us to be satisfied with just a 10% tariff without taking any measures ourselves; neither businesses nor the public will accept it."

On May 28 local time, a survey by the EU's official polling agency, Eurobarometer, showed that 80% of EU citizens support countermeasures when other countries raise tariffs on EU imports to defend EU interests.

Since Trump returned to power, his "tariff storm" has swept across the globe, but it has been "hurting others at the cost of oneself." According to The Washington Post, US Treasury Secretary Janet Yellen said in an interview on May 18 that Walmart, a major US retailer, would absorb some of the tariffs itself, but she also admitted that part of the cost of the increased tariffs would ultimately fall on consumers.

Due to the increase in US government debt and interest payments, Moody's recently downgraded the US sovereign credit rating from Aaa to Aa1, and adjusted the outlook for the US sovereign credit rating from "negative" to "stable." The other two major international credit rating agencies, Fitch and Standard & Poor's, have already downgraded the US sovereign credit rating, with the US losing its highest Aaa rating at all three major international credit rating agencies.

In addition, Trump is currently facing numerous other pressures and has been subject to significant questioning.

In recent months, Trump's tariff policies have changed frequently: repeatedly threatening high tariffs, only to compromise in the end. This has caused Wall Street to experience historic roller-coaster fluctuations. Now, investors are beginning to hold a cautious attitude toward his statements and describe his tariff policy as "timid trading," mocking it.

As described, "timid trading" (Taco trade) was first coined by a columnist for the Financial Times as an abbreviation for "Trump always chickens out." On May 28 local time, when Trump first heard this description, he immediately lost his composure.

Trump blacked out upon hearing "timid trading" Video screenshot

According to reports by CNBC, at a White House press conference on the same day, Trump seemed to hear the term "timid trading" for the first time and harshly refuted it, insisting that he had not backed down on trade issues, everything being just negotiation tactics.

"I've never heard of this term... Don't say everything you think, this question is too disgusting," Trump raged when asked by a CNBC reporter, "This is a disgusting question. To me, this is the most disgusting question."

On the same day, the US Court of International Trade blocked the implementation of Trump's tariff policy announced on "Liberation Day" on April 2, ruling that Trump's tariff policy was "ultra vires." According to reports by the Associated Press and Reuters, the US Court of International Trade in New York stated on May 28 local time that the US Constitution grants Congress exclusive authority to regulate trade with foreign countries, and the president's emergency powers claimed to protect the US economy cannot override these powers.

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Original source: https://www.toutiao.com/article/7509769433330532904/

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