EU leaders shift from defence to trade as Trump looms over Brussels summit

Good morning. Nato leaders weathered the Trump storm yesterday, with the US president departing The Hague after what he called a “tremendous” summit that saw allies pledge to jack up defence spending to 5 per cent of GDP. Now comes the hard part of actually paying up.

Today, many of those same leaders will reassemble in Brussels for an EU summit that my colleagues explain will turn to the other thorny Trump topic: trade. And our tech correspondent hears a plea for the EU to hold firm on its AI rules.

On to the next

Having survived Donald Trump’s assault on Nato in The Hague, EU leaders are moving on to the next transatlantic rift as they meet in Brussels to discuss trade, write Andy Bounds, Alice Hancock and Barbara Moens.

Context: The summit includes a dinner debate on “geoeconomics” that will discuss boosting EU competitiveness and independence, with the main course a potential deal to reduce US tariffs before a July 9 deadline.

During the meeting, European Commission president Ursula von der Leyen wants to get a steer from EU leaders on how much leeway she has to appease Trump.

One senior EU diplomat described it as a “postmortem” of the Nato summit. “I think we should all see them as a package, you know, transatlantic relations and security,” said a second.

As the deadline looms, pressure is rising to seal a deal with Washington to avoid “reciprocal tariffs” of 50 per cent.

Von der Leyen hopes to get guidance from EU leaders on whether she should aim for a quick deal with Trump, which could leave some tariffs in place as further negotiations continue, or whether the bloc should take a more confrontational approach to build leverage, officials say.

But while the commission wants to put a “credible threat” on the table, some member states are wary of the effects on their economies, looking to exempt items such as Boeing planes or alcoholic drinks from the proposed €95bn retaliation list. Others are concerned to rock the boat too much given the continued dependency on the US for security.

“We have a big stick,” said one EU diplomat, but if “member states nibble too much away from it for their own legitimate defensive interest, then the rebalancing measure weakens.”

Trump said yesterday Spain should suffer trade punishment for refusing to sign up to Nato’s new 5 per cent defence spending target.

But trade won’t be the only potential bust-up tomorrow. In a surprise move, France and other countries said they want to raise the bloc’s upcoming 2040 climate target, which is already being contested although the commission won’t table that legislation until next week.

Some countries fear the target will harm the bloc’s economy and industry, diplomats said. One suggested that the debate at the summit would be a good moment to gauge support for having the target at all.

Chart du jour: Steeled

High energy costs are among the myriad challenges faced by European steel producers, alongside little demand for costlier green products.

Hold the line

The European Commission must not water down upcoming rules on AI, a group of prominent AI researchers, civil society leaders and industry figures told Barbara Moens.

Context: The EU is struggling to agree on the exact timeline and conditions to implement its landmark artificial intelligence act, amid warnings from tech companies that the regulation could hinder innovation.

The commission is dragging its feet on publishing its so-called code of practice which is set to provide guidance to AI companies on how to implement the act, which from August will apply to powerful AI models such as Google’s Gemini, Meta’s Llama and OpenAI’s GPT-4.

In a joint letter seen by the FT, more than 40 signatories — including Nobel laureates Daron Acemoglu and Geoffrey Hinton — urge the commission “to resist pressures that would compromise this regulatory framework”.

Pushing back against pressure from big tech companies warning that strict rules could prevent much-needed investments, the signatories argue that legal certainty on the rule book is key, and that the main obstacle is not regulation but insufficient adoption of AI in the bloc.

Robust rules will help promote “the uptake of human-centric and trustworthy AI, while mitigating systemic risks,” they argue.

To ensure that, the signatories call for third-party testing of high-risk AI models and setting up an AI office within the commission.

Meanwhile, the Computer & Communications Industry Association, which includes a number of big tech companies, urged the commission to pause implementation of the AI Act, as industry needs more time to adopt the guidance when it comes.

A European Commission spokesperson said that the commission “is not watering down the AI Act; we are fully committed to the goals”.

What to watch today

EU leaders meet for a summit in Brussels.

German foreign minister Johann Wadephul hosts his Canadian counterpart Anita Anand in Berlin.

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