The EU is often accused of being slow and bureaucratic. The nature of a supranational organisation cannot be anything else, but for once the slow moving pace of the EU may play to its advantage.
Donald Trump has recently paused the announced tariffs on other countries. There will instead be a 90 day period where the U.S. will attempt to ratify as many free trade agreements as possible. The EU have stated that they are willing to enter into this process with the US.
The EU has a stronger hand in these negotiations than the U.S. in some regards. The EU can explore other trade options instead of the U.S. market, whereas the U.S. have now started a trade war with the entire world.
Brussels has delayed their retaliatory tariffs in response to Washington’s tariffs on steel and aluminium. This should continue for the 90 days while talks are ongoing. The EU should engage but not agree to anything in this time. The effects of the 125% tariffs on all imports from China have not taken effect yet and it would be better to see the reaction to these within the U.S.
In 1955 economist Victor Lebow wrote about America:
our enormously productive economy demands that we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfactions, our ego satisfactions, in consumption
Once American’s are no longer able to buy cheap products from the rest of the world how will they react?
In the days after “Liberation Day” on 02/04/2025 as Trump dubbed it, there were many new articles about how much an iPhone would cost due to the tariffs on China. The prices varied depending on how the writer calculated the production costs, but some went as high as $6,000. The fact that Trump gave smartphones an exemption from tariffs indicates that the White House is acutely aware of negative public reactions to some of its actions.
Republicans and Democrats are very divided. Where once there was cross party support for bills and negotiation on legislation, today politics is more like a team sport. You are either for the Blue team or the Red team. The ability to buy a new iPhone is something that Republicans and Democrats can agree on and is something that Trump will not want to be accused of making more expensive.
Inflation and the cost of living is an issue that Trump rode a wave on to the White House. There was genuine anger at the Biden administration over the rise in prices. All the talk of the relative health of the U.S. economy is meaningless to the average person if they can no longer afford what they used to. A declining standard of living is the worst issue that can face any politician.
American’s buy products from around the world because they want them, not because they are being forced to. 90% of microwaves, 95% of LED lamps, 88% of electric fans, 86% of video game consoles, 76% of children’s toys, and 69% of Lithium-ion batteries are imported from China alone. From the EU imports include items such as CRT machines, respirators, hearing aids, makeup and perfumes ($12.4 billion in 2024), food and beverages, cars, and high-end luxury items.
Trump has shown that he will perform a u-turn. In 2015 he was in favour of granting more H-1B visas for skilled workers, but once elected introduced stricter immigration rules and limited the use of those visas. Elected a second time and he now suggests that he supports the programme.
In the face of rising bond yields and the declining value of the dollar, he paused his tariffs to delay a catastrophe. Using the parlance of golf, he said that people were starting to get ‘yippy’.
rump’s economic policy has left the dollar as the reserve currency and U.S. bonds as a haven asset are now in question.
The sell-off may be signalling a regime shift whereby US Treasuries are no longer the global fixed-income safe haven – Ben Wiltshire, a rates strategist at Citi.
The U.S. no longer appears to be the stable market that you can invest in. This reality will take time to become apparent, but the American public will feel it. The purchasing power of the general public will take a negative hit from the tariffs Trump has placed on China alone.
this highly unusual pattern suggests a generalized aversion to US assets in global financial markets. We are being treated by global financial markets like a problematic emerging market – former Treasury secretary Lawrence Summers.
In the situation that the U.S. has created, then, it would be wise for the EU to take negotiations slowly. Do not rush into any agreement. Any trade agreement signed with the US could be discarded by Trump depending on his mood. The USMCA agreed during his first term, was suddenly a terrible agreement at the start of his second. Allow the U.S. and China to fight this trade war between themselves for now. Once the full effects of Trump’s actions are felt domestically then the picture will become clearer whether he intends to continue.
Washing My Brain 
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