U.S. President Donald Trump has walked back on his earlier threat to impose a 50% tariff on imports from the European Union (EU) beginning June 1.
The decision came after a direct appeal from European Commission President Ursula von der Leyen, effectively reinstating the July 9 deadline originally agreed in April to allow both sides more time to negotiate a trade deal.
Shortly after, European stocks rallied, with the STOXX 600 index rising 1% as investors breathed a sigh of relief. Automakers and luxury brands, key sectors reliant on transatlantic trade, saw some profits.
Oil prices edged upward as well, buoyed by the prospect of de-escalation in a trade confrontation that had rattled global markets just days earlier.
Trump’s U-turn followed a Friday announcement in which he threatened a 50% tariff, upset about the slow pace of talks with Brussels. That statement led to market panic and fears of another escalation in the already unstable U.S.-EU trade relationship.
However, Trump told reporters on Sunday: “We had a very nice call, and I agreed to move it. She said we will rapidly get together and see if we can work something out.”
Von der Leyen also noted: “Europe is ready to advance talks swiftly and decisively. To reach a good deal, we would need the time until July 9.”
The reversal results from the unpredictability of Washington’s current trade environment. Trump’s approach, with sudden policy changes, aggressive rhetoric, and preference for bilateral pressure, has placed longstanding allies in a continuous state of suspense.
While recent trade discussions with the UK and China have shown some signs of cooperation, talks with the EU have not been so good. Brussels is demanding a balanced agreement, while Washington pushes for wider concessions.
The EU exported over $600 billion worth of goods to the United States last year, making it one of the most noteworthy trade relationships globally. Under current conditions, European exporters already face 25% tariffs on steel, aluminium, and vehicles, along with 10% levies on other goods.
If no deal is reached by July, these tariffs could surge to 50%, directly affecting high-value products, from German luxury cars to French designer handbags and Italian food exports.
The impact wouldn’t be confined to Europe. Increased import duties would likely raise consumer prices in the U.S., limiting household budgets and disrupting business supply chains.
On Friday, before Trump reversed course, U.S. and European stocks tumbled, and the dollar weakened. Even the cryptocurrency markets weren’t left out, Bitcoin briefly dropped before rebounding to $109,000 after news broke that the tariffs would be delayed.
The EU is under pressure to act fast, with Washington’s stance changing by the week, the window to secure a stable agreement is narrow.
Failure to strike a deal by July could cause a fresh round of economic issues, one that neither side may be prepared to absorb in full.
