Background and progress of the US and EU tariff suspension

Event background and suspension measures

Origin of conflict: In March 2025, the US imposed a 25% tariff on EU steel and aluminum products under the justification of 'national security', affecting goods worth 380 billion euros, triggering the EU's retaliatory tariff plan, which proposed phased tariffs on 26 billion euros of US goods (including motorcycles, whiskey, agricultural products, etc.), with the first phase originally set to take effect on April 15.

  • Suspension process:

  • EU's proactive suspension: On April 10, European Commission President von der Leyen announced the suspension of the originally scheduled 25% counter-tariff set to take effect on April 15 for 90 days, but reserved the possibility of third-phase measures on soybeans.

  • The US simultaneously shows goodwill: On April 9, the Trump administration announced the suspension of 'reciprocal tariffs' for 90 days on countries that have not implemented retaliation, with the tax rate temporarily reduced to 10%.

  • Negotiation extension: Until May 26, the US agreed to the EU's request to extend the tariff negotiation deadline to July 9. Trump stated that the negotiations were 'very pleasant', but emphasized that if they fail, tariffs may be reimposed.



Core demands and differences

EU demands: The US must lift the 25% tariff on EU steel and aluminum within 90 days and establish a global trade compensation mechanism based on 'carbon intensity' and 'overcapacity'.

US position: Insists that the EU open its agricultural product market, reduce VAT barriers by 10%, and accuses the EU of 'non-tariff barriers' that hinder fair competition.

Underlying contradictions: The US is trying to reshape trade rules through tariff pressure, while the EU advocates multilateral negotiations and opposes unilateralism; both sides also have conflicts in areas such as digital services tax and financial services regulation.

Both sides' positions and strategies

  • The EU's considerations:

  • Economic considerations: Steel and aluminum tariffs lead to an annual loss of over 3.5 billion euros for the EU, and the automotive industry is accelerating its shift (e.g., BMW, Volkswagen building factories in Eastern Europe), with agriculture facing export risks.

  • Political and security: It is necessary to maintain transatlantic defense cooperation, especially against the backdrop of the Russia-Ukraine conflict, to avoid escalating trade wars that could affect NATO unity.

  • Preparation for countermeasures: Simultaneously formulate (anti-coercion legislation), authorizing sanctions in the financial and technological fields against the US, and considering taxation on digital services.


    US strategy:

  • Election-driven: Before the 2026 midterm elections, Trump is using tariffs to pressure for support from agricultural states, but faces concerns within the Republican Party about the side effects of the trade war.

  • Divisive pressure: While increasing tariffs on EU steel and aluminum, there are threats to impose even higher tariffs on allies like Japan and South Korea to force concessions from the EU.


Current impacts and future challenges

Short-term easing: The suspension of measures has alleviated the pressure of soaring commodity prices, and global stock markets have rebounded (for example, Germany's DAX index rose more than 8% in one day), but the US's 10% basic tariffs still suppress the EU's export competitiveness.

  • Long-term risks:

  • Negotiation uncertainties: If no agreement is reached before July 9, the EU may restart a 25% tariff, affecting key areas such as Boeing aircraft and pharmaceuticals, and the US may retaliate again.

  • Supply chain shocks: Industries such as automotive, aviation, and agriculture are facing restructuring, and European companies are accelerating risk diversification (e.g., the Dutch sovereign cloud service system).

  • Global trade order: The rise of protectionism may exacerbate 'de-globalization', with the World Bank warning that global GDP could lose 0.7% by 2025 due to trade friction.


Possible solutions and outlook

Phase compromise: Referencing the 2021 (global steel and aluminum trade agreement), the US may replace tariffs with a 'quota system', while the EU expands its imports of US liquefied natural gas.

Activation of multilateral mechanisms: The EU may collaborate with Canada and Japan to promote WTO reforms, restricting US unilateral actions while deepening free trade cooperation with non-US countries (e.g., the Southern Common Market).

Competition in technical standards: The contest between the two sides in areas such as digital taxes and green subsidies may shift to the struggle for rule-making authority, for example, the EU promoting 'carbon tariffs' to counter the US's 'clean technology subsidies'.

Summary

The suspension of tariffs between the US and EU is a tactical concession from both sides on the brink of a trade war, but the core contradiction remains unresolved. The negotiations in the next 90 days (until July 9) will determine the stability of the global supply chain and the direction of transatlantic relations. If negotiations break down, the global economy may face a more severe 'double loss' situation, and the space for cooperation will depend on whether both sides can find new balance points in areas such as technical standards and climate issues.



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