July 9, the day of reckoning on Trump’s tariffs
US President Donald Trump has set July 9 as the deadline for reaching a trade agreement with the European Union, otherwise US tariffs on European products could rise to 50 percent. Accept an unfavorable agreement or risk escalation? This is the dilemma facing Ursula von der Leyen’s Commission as negotiations with the Trump administration continue. But the heads of state and government, at the European Council on June 26, gave some indications: conclude an agreement quickly to end the uncertainty weighing on the Old Continent’s economy. Germany and Italy, the US’s two main trading partners, are ready to accept an “asymmetrical” agreement. That is, they would accept Trump’s 10 percent “basic tariff.” They would like to obtain concessions in sectors such as automobiles, aluminum, and steel, which are subject to tariffs of 25% and 50%, or pharmaceuticals and microprocessors, which could be hit with further tariffs in the future. A zero-duty quota like the one Trump granted to the UK? Or a 10 percent base tariff on all European products? The Trump administration has also asked the EU to bow to its demands on non-tariff barriers, such as the implementation of digital rules and security standards. France is less enthusiastic about an “asymmetrical” agreement. It is calling for “rebalancing” measures, i.e., European tariffs on American products to prevent relocation to the United States. But these will be much more limited than Trump’s tariffs against Europe. By July 9, negotiators in Brussels and Washington should reach an agreement in principle, giving themselves a few months to formalize the details. If they succeed, Ursula von der Leyen will be welcomed with full honors at the White House. Otherwise, Trump could unleash his trade wrath, pushing the EU to retaliate on US products worth nearly €100 billion.
July 15, foreign ministers put to the test in Gaza
High Representative Kaja Kallas received a double mandate from the European Council on June 26 on Gaza: to convince Israel to open the Strip to humanitarian aid to end the crisis afflicting the civilian population, or to present a set of options to punish Benjamin Netanyahu’s government at the Foreign Affairs Council on July 15. In June, the foreign ministers of the 27 member states found that Israel was violating Article 2 of the EU-Israel Association Agreement in both Gaza and the West Bank, after 17 member states had requested a review. The heads of state and government took note of this. Three of them – Spain’s Pedro Sánchez, Slovenia’s Robert Golob and Ireland’s Micheál Martin – insist on suspending the association agreement in whole or in part. However, there is neither unanimity nor the required qualified majority among the 27. Hungary is vetoing symbolic measures, such as sanctions against violent settlers in the West Bank. Sweden has proposed banning trade in goods and services with the occupied territories on the basis of an opinion from the International Court of Justice. But it has only gained the support of nine member states. A qualified majority is required: 15 countries representing 65 percent of the European population. Foreign ministers will probably just take note of the lack of progress on Gaza and postpone everything until after the summer.
July 16, the EU’s 2028-34 budget proposal
It is the beginning of a long negotiation, which could last for almost two years and end with a marathon session between heads of state and government in the spring of 2027: on Wednesday, July 16, Ursula von der Leyen’s Commission will present its proposal for the next Multiannual Financial Framework (MFF), i.e., the EU budget for 2028-34. “We have to admit that we have reached the limits of what is possible. Our current budget was designed for a world that no longer exists: the world of 2020”, von der Leyen said in a speech at the annual budget conference organized by the Commission in May. Von der Leyen wants a more flexible EU budget, with more resources dedicated to defense and competitiveness. The price to pay is a restructuring of funds for the common agricultural policy and cohesion policy. Von der Leyen would like to pre-allocate resources for each member state in these areas and pay them out in a single national check based on the NRRP model: when reforms and investments are made, the Commission sends the transfer. However, her proposals are meeting with strong resistance. The CAP is an untouchable totem for many member states. Southern and eastern countries are opposed to calling into question cohesion funds. Furthermore, with a ceiling of 1% of gross national income for the EU budget, there is a resource problem exacerbated by the need to start repaying the NextGenerationEU common debt. In 2030, if not sooner, the EU could enlarge. All EU policies depend on MFF resources, from external action to immigration, including the strengthening of the military industry. In his report on competitiveness, Mario Draghi proposed a new common debt instrument. Several frugal countries are in favor of doing so in defense. But Germany and the Netherlands remain opposed. And von der Leyen continues to ignore Draghi’s suggestion. Many are betting that her MFF proposal will be significantly amended before a unanimous agreement can be reached among member states.
July 24-25, a summit with China fraught with uncertainty
The occasion is the 50th anniversary of the establishment of diplomatic relations between the EU and the People’s Republic of China. The backdrop is the global trade war launched by Donald Trump, but also the bilateral trade disputes that are piling up with Beijing. The President of the European Council, António Costa, and the President of the Commission, Ursula von der Leyen, will be in China at the end of July for a summit with President Xi Jinping. The date is not yet official, but it will probably be set for July 24 and 25. The EU’s goal is to rebalance the relationship, open up the Chinese market, and secure the removal of restrictions on exports of rare earths and magnets. Brussels also wants China to remove tariffs on brandy imposed by Beijing in retaliation for European tariffs on Chinese electric vehicles, as well as guarantees on dairy products and pork. But Beijing does not intend to budge unless it gets concessions on electric vehicles and other measures the EU has adopted to protect its market from predatory Chinese behavior. In 2023, von der Leyen presented her de-risking strategy. With Trump’s return to the White House at the beginning of the year, the Commission president was tempted to seek a rapprochement with Beijing, announcing the possibility of deepening trade ties and signing investment agreements. At the G7 in Canada in June, von der Leyen returned to her hawkish stance on China. “We are all witnessing the costs and consequences of Chinese coercion through export restrictions”, von der Leyen said. Beijing immediately responded by accusing the Europeans of behaving unfairly with the Czech Republic’s accusations of cyberattacks and Belgium’s corruption investigation against Huawei. Von der Leyen’s hope that Trump will push China to change its practices with the EU is likely to be disappointed at the summit with Xi Jinping.
