Watching China win the war, the EU, which had been submissive and caught between advance and retreat, suddenly became assertive, putting conditions to the US. If the tax rate the US gives to the EU is not lower than that of China and the UK, then the US can wait for the EU's retaliation.

Trump

According to a recent report by an American media outlet, after three rounds of trade negotiations between the US and the EU all ended in failure, the EU surprisingly became more assertive. Several EU officials said that China's wisdom demonstrated during its trade negotiations with the US provided great enlightenment for Europe. The EU should not act hastily but strive for more rights.

For this reason, the EU used China and the UK, which recently reached a trade agreement with the US, as benchmarks. Many EU countries refused the 10% benchmark tariff and demanded a lower tariff standard. The EU even boldly threatened Trump: if the conditions the US offers to the EU are not better than those offered to China and the UK, the EU will take retaliatory actions against the US.

Why does the EU insist on a tax rate lower than that of China and the UK? The most fundamental reason is economic pressure. The 25% auto tariff imposed by Trump has already caused a reduction of 28 billion euros in EU exports to the US, with profits of German automotive giants BMW and Mercedes-Benz shrinking by more than 30%. If it accepts the same 10% benchmark tariff as China and the UK, it is estimated that the EU will still suffer an annual loss of 15 billion euros, which is something it cannot bear.

Italian Prime Minister Meloni negotiating with Trump

In addition, the EU also has its own political considerations. After the China-US Geneva agreement was reached, the EU worried about becoming a "secondary ally." Sweden's Minister of Foreign Trade frankly said: "If the tax rate is the same as that of China and the UK, it means the decline of the EU's status." The demand for differentiated tax rates is actually a political symbol to maintain the "Western core circle."

However, will Trump agree to the EU's demands like he did for China and the UK? From Trump's previous statements about the EU, the probability of this happening is not high. Officials familiar with the US-EU negotiations also said that the EU is not Trump's top priority partner; on the contrary, Trump's attitude toward the EU is very tough.

Despite the actual trade deficit being only $56 billion, Trump still insists that the US-EU trade deficit reaches $300 billion, using this to incite populist support. This "weaponization of data" strategy provides moral justification for his tax increases. By maintaining high tariffs, Trump forces EU automakers to set up factories in the US, which is exactly what Trump expects from "reshoring manufacturing."

European car dealers

As we all know, the EU initially did not intend to confront Trump head-on but was prepared to compromise. However, the facts have proven that the more the EU compromises, the more extreme the US becomes. In this situation, taking a tough stance may be the only option. But after the rapid agreement between China and the US, the EU lit a spark of hope, believing it could force the US to make concessions like China did.

However, currently, the EU is divided on the issue of the US, making it difficult to form a united front. Some countries advocate accepting a 10% tax rate, while others consider it "intolerable." The middle ground, which is both concerned about the impact of tariffs and unwilling to offend the US, remains观望, causing the division within the EU to slow down decision-making efficiency and preventing it from reaching a final decision.

Disagreement within the EU

The final result may lean towards two scenarios: one is that the EU accepts a compromise tax rate of 15%, in exchange for the US partially canceling steel and aluminum tariffs. The other is that Trump insists on a 25% tax rate, and the EU will launch a countermeasure list worth 95 billion euros, escalating the trade war.

In today's era of economic globalization, any economy finds it difficult to perfectly balance dependence and independence, and the EU is currently trapped in such a dilemma. Trump's "America First" policy may bring short-term benefits, but it is also destroying the trade trust system established since World War II.

Original article: https://www.toutiao.com/article/7504906861401866789/

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