Competitiveness Check – July 17 Edition

Antonia Wunnerlich,
Penny Naas

The Quick Take

In the ongoing tempest of tariffs, who shall take the helm? US President Donald Trump’s threat to impose a 30% tariff on the EU beginning August 1 has ramped up the pressure to cut a deal. Questions remain about the consequences if there is no deal, and whether Trump will follow through on his threat. The EU maintains that countermeasures—including its anti-coercion instrument, often termed the “nuclear option”—remain on the table. Meanwhile, on July 16, European Commission President Ursula von der Leyen unveiled the bloc’s proposed new Multiannual Financial Framework (MFF) for 2028–2034.

Top Five Transatlantic Trade-Related Developments

  • July 7: Trump extended the deadline for “reciprocal” tariffs to resume. The new deadline is August 1. In the meantime, new tariff rates for individual countries were communicated in letters.
  • July 9: Trump announced a 50% tariff on copper, effective August 1. The president had requested a Section 232 investigation into copper on February 25, and the US Department of Commerce formally launched one on March 10. Trump said that he had received the report, but it is not yet publicly available. Copper is an important resource, particularly for tech devices, power grids, home appliances, and cars.
  • July 12: The EU received a letter from Trump warning that the United States will impose 30% tariffs on the bloc starting August 1. Von der Leyen reiterated the bloc’s commitment to negotiations but warned that retaliatory measures remain on the table. Sectoral tariffs on autos (25%) and iron/steel/aluminum/copper (50%) will be applied separately.

    The EU announced that it wanted to continue to prioritize negotiations with the United States and that it will suspend until early August rebalancing tariffs of €21 billion on US goods that were set to take effect on July 14. (A second list of rebalancing tariffs, covering €72 billion in US imports, is also under discussion for possible application after August 1.) That same day, von der Leyen informed reporters that a political agreement had been reached with Indonesia on a Comprehensive Economic Partnership Agreement (CEPA).
     
  • July 16: Von der Leyen unveiled the EU’s next long-term budget proposal for 2028–2034. The so-called Multiannual Financial Framework (MFF) acts as a cornerstone of the EU’s strategic objectives. There have been six MFFs to date, including for 2021–2027. The proposed MFF for 2028–2034 amounts to €2 trillion, a nominal increase of around 54% compared to the current budget, which in today’s prices amounts to roughly €1.3 trillion. In terms of the EU’s gross national income (GNI), the new MFF would rise from 1.13% to 1.26%, marking a 0.13 percentage point increase. 
    The Commission has proposed allocating €410 billion to the European Competitiveness Fund. Some €200 billion have been earmarked for “EU Action on the Global Stage”. 
    The Council of the EU and the European Parliament must now adopt positions on the proposal, which will subsequently be negotiated by the two institutions.
  • July 8–17: From July 8–10, the United Kingdom welcomed French President Emmanuel Macron for a state visit, the first by an EU head of state since Brexit. Key deliverables include expanded joint defense planning in cyber and space, a £1.1 billion EDF investment in the Sizewell C nuclear plant, and a new industrial strategy partnership focused on AI and clean tech. A pilot scheme to manage Channel migration was also proposed.

    On July 17, British Prime Minister Keir Starmer hosted German Chancellor Friedrich Merz in London for the signing of the Kensington Treaty, the first bilateral UK-Germany treaty since World War II. The agreement includes a list of 17 joint UK-Germany projects enhancing cooperation on security and defense, migration, energy, climate, bilateral trade, and scientific research.

Figure of the Fortnight

65%: According to the World Bank, EU GDP was 65% of US GDP in 2023, down from over 100% in 2008. Jamie Dimon, chief executive of JPMorgan Chase, highlighted these figures at an event in Dublin in early July, warning of a growing competitiveness gap.

Quote Unquote

“You're on a more friendly tariff, right, a little bit more friendly tariff.… They would like to do a different kind of a deal, and we're always open to talk. We are open to talk, including to Europe. In fact, they're coming over. They'd like to talk to us.”

—US President Donald Trump at a July 14 press conference with NATO Secretary-General Mark Rutte.

“If you want peace, you have to prepare for war, and I think that’s where we are. So, of course, we shouldn’t impose countermeasures [at] this stage, but we should prepare to be ready to use all the tools in the toolbox.”

—Danish Foreign Minister Lars Løkke Rasmussen before a July 14 meeting of EU trade ministers.