Trump gives Europe until July 4 to implement the trade agreement economy

US President Donald Trump said that he had a “wonderful call” with European Commission President Ursula von der Leyen, on Thursday, and gave the European Union until July 4 to implement what he described as the trade agreement, otherwise Washington will raise customs duties to much higher levels.

Trump wrote on his platform, “Truth Social,” that he waited “patiently” for the European Union to fulfill what he considered to be its obligations in the “historic trade agreement,” which he said the two sides had reached in Turnberry, Scotland, adding that a promise had been made that the European Union would reduce its customs duties to zero.

The US President added that he agreed to give von der Leyen a deadline until the United States’ 250th birthday, referring to July 4, saying that the tariffs would rise “immediately to much higher levels” if the European Union did not adhere to the agreement.

Last Friday, Trump threatened to raise duties on European cars and trucks to 25% this week, from the current 15%, accusing the European Union of not adhering to the terms of the trade agreement concluded in Scotland last July.

New threat

Trump’s threat comes at a time when the trade agreement between the United States and the European Union has entered a sensitive phase, as the European Parliament approved the agreement last March after amendments, but it needs negotiation and approval by member states to complete its implementation path.

Under the agreement, the European Union agreed to cancel duties on American industrial goods, in exchange for a ceiling of 15% for most European products, but Brussels says that Washington did not adhere to some parts of the agreement, especially after the United States last August expanded 50% duties on European steel and aluminum to include hundreds of new products.

The President of the European Commission said earlier that the Union is in the final stages of implementing the remaining customs obligations, but at the same time she indicated that there are American obligations that still need to be aligned with the agreed upon ceiling.

The recent American threat a few days ago prompted European capitals to re-evaluate the timing of the final ratification of the agreement, although several countries within the Union see the need to move forward to demonstrate the bloc’s reliability in implementing its trade obligations.

According to previous European discussions, the talks focused on two main items:

• the first: It allows the European Union to reduce duties on American exports only after Washington reduces its duties to a ceiling of 15%.
• the second: Allows the agreement to be terminated if Trump imposes new tariffs by March 31, 2028, without the need for a new vote.

European concern

Europe faces a dilemma between trying to maintain the trade agreement with Washington and avoid a new tariff war, and increasing internal pressure to respond to Trump’s threats, especially if they affect strategic sectors such as cars, steel, and technology.

Germany is the European party most exposed to the repercussions of any new hike in fees, as the proposed increase to 25% will hit the German auto sector, led by companies such as Volkswagen, at a time when the German economy is already suffering from a prolonged slowdown.

The German Ifo Economic Institute warned that the dispute turning into a new trade war could push Germany into an economic recession this year, especially since raising duties from 15% to 25% would hit the automobile industry sector, one of the pillars of the German economy.

German Finance Minister Lars Klingbeil said earlier that Europe does not want any escalation and is seeking a common path with the Americans, while French Finance Minister Roland Lescure said that the two sides have an agreement being negotiated, and that the European Union is ready to proceed with it in good faith.

But France showed a more stringent position, as French Trade Minister Nicolas Forisier said that the European Union has tools that it can use if Trump makes excessive threats to strategic industries, stressing that Europe “will no longer be naive.”

Response tools

The European Union has several tools to respond if Trump turns his threats into effective decisions, including suspending the trade agreement, activating the tool to combat economic coercion known as the “bazooka,” and imposing counter duties on American products, in addition to targeting major American technology companies with European duties or taxes.

The tool to combat economic coercion allows the European Union to stop the flow of some American products to the European market, exclude American companies from public tenders, or impose fees on American digital products, but it requires an investigation that may last 3 months, which makes its application not immediate.

Brussels also has a ready list for counter-tariffs that includes American goods worth 93 billion euros ($109.5 billion), and includes about 2,000 American goods in a list that extends to 99 pages, including washing machines, refrigerators, snowplows, boats, and agricultural products such as beef, poultry, dairy, sugar, vegetables, and almonds, in addition to industrial products such as textiles, leather products, household appliances, and plastic and wooden tools.

European parties say that retaliation is not limited to retaliation, but rather is based on the principle of reciprocity in the rules of the World Trade Organization. However, this option carries great risks, most notably the possibility of a new American retaliatory response that expands the scope of the trade dispute.

Brussels is also offering the option of imposing fees or taxes on giant American technology companies such as Google, Microsoft, Apple, MasterCard, and PayPal, but this path faces political obstacles within the Union, especially with countries such as Ireland’s reservations about a unified digital tax at the bloc level.

European estimates indicate that imposing taxes on the revenues of American technology companies in Europe may generate about 37.5 billion euros ($44.1 billion) annually for the European Union, but it will not be a quick option to implement, and companies may try to burden consumers with part of its consequences.