EU to keep calm and carry on in trade talks after Trump tariff reprieve

Good morning. A scoop to start: EU regulators are planning their first stress test of non-bank financial institutions, people involved in the talks told the Financial Times, in a move likely to spark concern among hedge funds, private credit groups and money market funds that could be subjected to greater scrutiny and restrictions.

Today, our trade supremo assesses the EU’s waning appetite for a full-fat trade fallout with the US, and our finance correspondent reports on the efforts by Brussels to lower the price cap on Russian crude exports.

Now we’re talking

After a whirlwind 72 hours in EU-US trade talks the message from member states last night was to keep calm and carry on, writes Andy Bounds.

Context: Irritated by what he saw as stalled negotiations with Brussels, US President Donald Trump on Friday threatened to impose 50 per cent tariff on EU imports. On Sunday, he delayed that threat until July 9 following a call with European Commission president Ursula von der Leyen in which she pledged to use that time to reach a “good deal”.

Urged on by key member states, there was little time wasted in turning that promise into action. Yesterday, EU trade commissioner Maroš Šefčovič spoke to US commerce secretary Howard Lutnick and trade representative Jamieson Greer, the second such call in four days.

Šefčovič posted on social media afterwards that the commission “remains fully committed to constructive and focused efforts at pace towards an EU/US deal”.

Gone was his bravado of Friday, when he urged the US not to issue threats and stressed the EU would “defend our interests” — a change of tone also noted in von der Leyen’s brief statement on Sunday night.

The markets certainly prefer jaw-jaw to trade war-war. Germany’s Dax index gained 1.7 per cent yesterday, France’s Cac 40 rose 1.2 per cent, and the FTSE MIB in Milan closed 1.3 per cent higher.

Still, the EU is refusing to give way on key US demands, such as scrapping digital taxes and reducing food standards to accept more American products.

There was no change in Brussels’ position, according to one diplomat briefed on a meeting of EU ambassadors last night. “Our united stance remains the same,” the diplomat said. 

“We are standing firm and united, with full trust in the Commission,” said another.

Some diplomats and officials think Trump’s threat is a bluff, given the damage tariffs would cause to his own economy. But others believe tariff retaliation, such as the €95bn list of goods proposed this month, might be necessary to force a deal.

But almost all agree that whatever deal they get, it will probably leave tariffs higher than they were before he came into office.

Chart du jour: Nuts and bolts

Four of Europe’s oldest industrial groups have added more than €150bn to their market caps on the back of soaring demand for data centres that power artificial intelligence.

Tighten up

The European Commission and the EU’s most powerful member states are pushing to lower the price cap on Russian oil as part of a broader tightening of sanctions against Moscow, but it’s unclear if they have enough support at home and abroad, writes Paola Tamma.

Context: Brussels is seeking to hit Moscow with more substantial measures, including lowering a $60 per barrel price cap on crude oil exports to $45 per barrel, according to people briefed on initial discussions on the EU’s 18th sanctions package in response to Russia’s full-scale invasion of Ukraine.

But the idea has yet to convince all the EU’s 27 member states and its G7 partners. 

At a gathering of G7 finance ministers last week in Banff, rotating chair Canada suggested including explicit language on tightening the oil price cap in the joint statement. The motion was supported by the EU and its G7 members France, Germany and Italy as well as the UK, but was not included at the request of US treasury secretary Scott Bessent, according to three officials briefed on the meeting.

The US Treasury declined to comment. 

The final communiqué settled for language that committed G7 nations to “continue to explore all possible options, including options to maximize pressure such as further ramping up sanctions” in case no ceasefire is agreed. 

Separately, EU countries which were previously reluctant to embrace the oil price cap idea, such as Hungary and Greece, are still evaluating the proposal, officials said.

“We are ready to apply more pressure from Russia on the European side and we’re hoping other partners will be ready to follow,” commission spokesperson Anitta Hipper said yesterday.

What to watch today

Meeting of EU general affairs ministers in Brussels.

Polish President Andrzej Duda meets German President Frank-Walter Steinmeier in Berlin.

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