The Economy Brief – Ursula in von der Land: Why Brussels’ US trade plan is as mad as a hatter

Yesterday, the European Commission announced a fresh package of retaliatory levies on US goods – and then, bizarrely, denied it was actually retaliating.

Brussels is “moving from retaliation to rebalancing”, a Commission official explained, adding that the new measures will likely “have a longer shelf life” than a separate list of countermeasures that Brussels suspended last month.

“We're moving away a little bit from… just looking at short-term pressure to help us at the negotiating table to a situation where, if tariffs stay in place… we will have to rebalance and respond to unilateral changes in the terms of trade by the United States,” the official said.

In other words: Retaliation is, by definition, temporary. But Trump’s tariffs are probably permanent – hence, the EU isn’t retaliating, but “rebalancing”.

The semantic sophistry is certainly strange. (Is ‘permanent retaliation’ a contradiction in terms?) But, as Humpty Dumpty taught Alice during her adventures in Wonderland, words can mean whatever one wants them to mean.

Moreover, the basic thought underlying the terminological shift appears well-founded. Some, though not all, of Trump’s tariffs on EU goods are likely to be permanent. But which?

“Hard to say,” the same Commission official said. But then how, pray tell, is the Commission able to infer which of its own duties are retaliatory, and which are, er, rebalancatory?

When pressed on the issue, the official suggested that Trump’s 25% tariffs on steel, aluminium, and cars are likely not open for negotiation. However, Washington seems to be “more flexible” on its 10% “universal” levy on all other US imports.

“I would say the 25% [tariffs] seem to be a bit more driven by this perspective of reshoring and reindustrialisation,” they said.

This, however, only makes the Commission’s verbal jujitsu even more peculiar – indeed, it’s through-the-looking-glass weird.

Read more.

The UK strikes preliminary deal with the US to ease tariffs on cars and boost trade in beef. British Prime Minister Keir Starmer said the UK will be exempted from US President Donald Trump’s 25% tariffs on steel and aluminium, and will receive some relief from the 25% duties on cars. A quota of 100,000 British cars per year will be subject only to the 10% blanket tariff on all US imports, which remains in force against the UK. Read more.

European firms based in China fear being caught up in US-China trade war. The European Union Chamber of Commerce in China (EUCCC) reported on Thursday that 59% of its 1,700 members believe that operating in China has become more difficult since the start of the year, while just 5% said that business has become easier. Jens Eskelund, president of the EUCCC, attributed the sharp decline in business confidence to the “uncertainty and unpredictability” generated by US President Donald Trump’s tariffs. Trump has imposed tariffs of up to 145% on Chinese goods since his return to the White House in January. Beijing has responded with retaliatory duties of up to 125% on US goods. Read more.

EU pledges to intensify cooperation with US on AI to avoid Trump tariffs. European Commissioner for Trade Maroš Šefčovič said on Wednesday that the EU and the US “have the same interest” in the field of AI, including the desire to “build the AI factories” that are essential for firms including Apple, Google, and Meta. The veteran commissioner added that deeper tech collaboration would be mutually beneficial. “We have the printing machines, which are printing the chips, they have the technology, and I believe that we are allies and should have the same interest in that regard,” Šefčovič said. Read more.

EU audit body slams European Commission’s push to model the bloc’s regular seven-year budget on its pandemic recovery fund. The European Court of Auditors (ECA) reported on Tuesday that the Recovery and Resilience Facility (RRF) – a €650 billion cash pot that came into effect in 2021 – is plagued by numerous “weaknesses” including insufficient supervisory controls, a lack of transparency, and deficiencies in planning how the payments will ultimately be financed. “The RFF... has limited focus on results, no information on actual costs, [and] it is not clear what we got for the money,” said Ivana Maletić, one of the report’s co-authors. The auditors also vehemently disputed Brussels’ description of the RRF as “performance-based”, arguing that the fund instead merely focuses on measures’ “implementation progress”. Read more.

Leading environmental groups call for doubling of EU’s multi-year budget. The NGOs, which included Greenpeace and the WWF, said the EU’s next seven-year Multiannual Financial Framework (MFF), which is set to enter into force in 2028, should be increased from €1.2 trillion to €2 trillion. They also called for a successor to the EU’s ‘NextGenerationEU’ Covid-19 recovery fund, which is financed through joint borrowing and of which the RRF is the flagship component. The NGOs’ proposals are deeply controversial among member states. France, one of the EU’s traditional agenda-setters, has repeatedly called for the bloc’s budget to be doubled and for the regular issuance of common EU debt. Spending-averse EU countries such as the Netherlands, however, are staunchly opposed to such measures. Read more.

Just over half of the EU’s 27 member states ask Commission for more budgetary leeway to ramp up defence spending. Only 14 countries have formally heeded Brussels’ call to activate the “national escape clause”, which allows EU capitals to boost military expenditure by an additional 1.5% of annual GDP over the next four years without violating the bloc’s strict budget rules. The scheme is a critical pillar of the Commission’s ‘ReArm Europe’ plan to counter Russia’s military threat and mitigate the US’ waning support for European security. The lack of uptake has raised fears that Brussels’ ambitious rearmament plan could fall short of its €800 billion target. Read more.