EU flags flutter in front of European Central Bank (ECB) headquarters in Frankfurt, Germany July 18, 2024.
Jana Rodenbusch | Reuters
European leaders are gathering Monday to discuss how to finance huge investments in defense — but the latest moves by U.S. President Donald Trump will loom large over the meeting.
Over the weekend, Trump confirmed upcoming tariffs on goods from Mexico, Canada and China, due to kick in on Tuesday. For now, European goods were spared, but EU officials know they could well be next in line.
The U.S. President has not been shy in sharing his opinions on Europe’s trade practices. In fact, overnight, Trump told reporters, “it will definitely happen with the European Union.”
“I can tell you that, because they’ve really taken advantage of us. And, you know, we have over a $300 billion deficit. I wouldn’t say there’s a timeline but it’s going to be pretty soon,” he added.
In 2023, the United States was the EU’s largest export market, according to the European statistics office, although the bloc also imports significant amounts from the U.S.
While the EU sells mostly cars and pharmaceutical products to the U.S., it imports mostly oil and natural gas from the U.S.
There’s a consensus in the European Union that one way to mitigate trade tensions with the U.S. will be by increasing energy purchases.
Speaking ahead of the Europe Union leaders’ meeting on Monday, an EU official, who did not want to be named due to the delicate nature of the relationship with the U.S., said they expected Trump’s latest moves to be mentioned.
“I don’t expect a specific discussion on tariffs but the issue is likely to be raised by some leaders,” the official told CNBC Sunday.
Firm Response
In the meantime, the EU has been preparing for potential tariffs from the United States and has vowed a “firm” response to any new duties.
“The European Union regrets the U.S. decision to impose tariffs on Canada, Mexico, and China,” a spokesperson for the European Commission, told CNBC Sunday.
“The EU firmly believes that low tariffs drive growth and economic stability within a strong, rules-based trading system. However, the EU would respond firmly to any trading partner that unfairly or arbitrarily imposes tariffs on EU goods,” they added.
And although Trump’s latest duties do not target the EU directly, officials in the bloc are aware of their indirect consequences.
A senior diplomat, who did not want to be named due to the sensitivity of the issue, told CNBC there’s a realization that a trade confrontation with the EU is approaching.
“The EU can still negotiate, including by buying more LNG, but it will be very hard [to avoid an escalation],” the senior diplomat said.
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