Trump’s latest phone negotiation tactic on tariffs likely to heighten EU retaliation threat

President Trump’s flurry of pronouncements marks the return of negotiation by smartphone and may trigger another period of profound uncertainty for international trade and financial markets. His grievances with Europe appear to have an extra edge and the consequences of the uncertainty he’s sparked will be far-reaching.

The threat of 50% tariffs against the European Union, issued hours before his trade representative met their European counterparts, is a show of presidential muscle surely designed to strong arm those on the other side of the table but not for all.

It is an escalation likely to heighten the threat of retaliation from Europe, and with a few keystrokes ends the brief period of calm that had returned to global trade and markets in recent days.

Talks in Switzerland between US and Chinese delegations a fortnight ago took the sting out of Sino-American hostility, negotiating three-figure tariffs that amounted to a mutual trade embargo down to manageable levels.

Financial markets had regained most of the losses sparked on ‘Liberation Day’ in April, when Donald Trump declared total trade war, and there was optimism that for all his bluster, there might be meaningful room for constructive compromise.

The UK even secured a deal of sorts, securing a reduction in auto tariffs in exchange for a reciprocal opening of agricultural markets.

There will be no such deal for the EU in a hurry. A 50% tariff on all exports to the US is not only higher than the original threatened blanket tariff of 20% and double Mr Trump’s proposed 25% on European cars, it’s higher even than China.

European stocks predictably ended the week in decline, with car manufacturers including BMW, Volkswagen and Stellantis all down.

Mr Trump has repeatedly blinked first in the trade war he started, backing down on global reciprocal tariffs when bond markets rebelled before caving in Geneva to reach an accommodation with China.

His grievances with Europe appear to have an extra edge however, and the consequences of the uncertainty he’s sparked will be far-reaching as one might think.

It would still have been huge, if it this was the only thing he had announced on ‘Liberation Day’