A recent phone call between U.S. President Donald Trump and European Commission President Ursula von der Leyen has sparked renewed hope for trade talks between the United States and the European Union. The conversation took place over the weekend, and during it, Trump decided to back off from his earlier threat to impose a hefty 50% tariff on EU imports scheduled for next month.
Trump had initially set a deadline of July 9 for negotiations, which he later reaffirmed after describing the call with von der Leyen as “very nice.” The EU spokesperson confirmed that von der Leyen initiated the call, emphasizing that it has given “new impetus” to the ongoing trade discussions.
In response to the news, the euro rose to a one-month high against the dollar, and European stock markets experienced a boost, recovering from previous losses. Meanwhile, gold prices dropped as the potential for tariffs decreased, reducing the demand for this traditionally safe investment.
On Monday, U.S. and EU trade representatives were set to meet to further discuss the details of the negotiations. An EU spokesperson mentioned that both sides agreed to fast-track the talks and maintain close communication. German Economy Minister Katherina Reiche urged a calm approach to the tariff discussions, highlighting the importance of finding a common ground.
Just days before this diplomatic breakthrough, Trump had expressed frustration over the slow pace of negotiations, threatening to implement the 50% tariff on June 1. His sudden change of heart has relieved markets but also raised questions about the unpredictability of his trade policies.
Michael Pfister, a currency strategist at Commerzbank, noted that while a deal could potentially be reached by the July deadline, the fundamental issues in the negotiations remain unresolved. The EU is currently facing 25% tariffs on steel, aluminum, and cars from the U.S., with additional tariffs on other goods that were set to increase after a brief pause.
Businesses across Europe are on edge as they await clarity on the situation. EU trade chief Maros Sefcovic is scheduled to hold a video conference with CEOs from major automotive companies, including Mercedes-Benz and Volkswagen, as they seek guidance on how to proceed.
Despite the temporary relief, some companies, like Germany’s LAPP Group, have warned that certain products will still be impacted by the looming tariffs. CEO Matthias Lapp expressed concerns about the current political climate in the U.S., characterizing it as unpredictable and damaging to long-standing transatlantic relationships.
Trump’s decision to delay the tariffs came after von der Leyen requested more time to reach an agreement. She emphasized the EU’s readiness to engage in swift negotiations, indicating that both sides are eager to work towards a beneficial deal.
As the discussions continue, the outcome remains uncertain. The negotiations have been complicated by differing demands from both sides, with the U.S. seeking concessions while the EU aims for a mutually beneficial agreement. The pressure is on as the July 9 deadline approaches, and both parties hope to avoid a further escalation of tariffs that could impact consumers on both sides of the Atlantic.