US President Donald Trump has postponed the implementation of a 50% import tariff on European Union (EU) goods from June 1 to July 9, giving some time for trade talks to continue. The postponement came after a phone call with European Commission President Ursula von der Leyen, who said the EU was ready to speed up negotiations. European stocks rose on Monday morning, but market uncertainty remained high as the exact direction of the talks remained unclear.
Analysts have warned that while the tariff delay provides some relief, the risk of a full-scale trade war remains. Berenberg Chief Economist Holger Schmieding believes the six-week period could be enough to set the framework for a deal similar to that reached between the US and the UK, including a tariff reduction to around 10%. However, if the US goes ahead with a blanket tariff of 20% or 30%, the EU is likely to take significant retaliatory measures.
The EU is unlikely to succumb easily to Trump’s “surprise” tactics. According to Guntram Wolff of Bruegel, the EU has made various offers but it is still unclear what exactly the US President wants. In contrast to the UK’s more yielding approach and China’s aggressive approach, the EU has chosen a middle ground. not giving in, but also avoiding open confrontation. However, if pressure continues to mount, the EU is prepared to act, especially in the pharmaceutical and services sectors that are crucial to the US economy.
Naeem Aslam, Chief Investment Officer of Zaye Capital Markets, warned that the US-EU talks are “an important watch” with July 9 as the next milestone. While markets have shown a temporary positive reaction, sectors such as technology and industrials remain high-risk. He stressed that investors should be “fully prepared”, as these talks may not be a peace deal, but a preparation for a larger economic battle.
