SCOTT DETROW, HOST:
There's just five days until a 30% tariff is placed on most goods from the European Union on August 1. Negotiations are ongoing, and tomorrow, President Trump will meet with European Commission President Ursula von der Leyen in Scotland. Trump has said there's a 50-50 chance the EU and U.S. could make a trade deal, but what could that look like, and what is at stake if a deal is not reached? To discuss, we called Cecilia Malmstrom, former European Commissioner for Trade. Welcome to the program.
CECILIA MALMSTROM: Thank you.
DETROW: Before we dive into the negotiations, can you just give us a sense of the EU-U.S. trading partnership? What kind of goods are we talking about? How broad is this? How important is this?
MALMSTROM: Well, this is one of the most important trading relationships in the world. We trade for more than $4 billion a day, and the trans-Atlantic economy accounts for between 16 and 17 million jobs on both sides. So it's very important, and we would rather be engaged in seeing how we could further deepen and facilitate trade across the pond.
DETROW: Four billion a day.
MALMSTROM: Yeah, it's a lot.
DETROW: I mean, we're talking about a wide range of goods then, obviously. But off the top of your head, what are some of the most prominent goods affected here? What could be some of the immediate things consumers on both sides see if these high rates go into place?
MALMSTROM: Well, it's cars, steel, airplane parts, chemicals, fashion, food, clothes, wood, different sort of pharmaceuticals, a lot, I would say. And we buy a lot of digital services from you guys.
DETROW: That seems like a lot of things that affect my daily life.
MALMSTROM: Yeah, indeed.
DETROW: Like I mentioned, the president says there is a 50-50 chance of a deal. A lot of these tariff negotiations have come and gone and really shifted directions at the last minute. What would you say the U.S.'s best leverage is right now?
MALMSTROM: Well, it's an awkward situation, of course, when you negotiate a trade agreement. Normally, you give and take, you find a compromise, and it's a win-win situation. Here, we negotiate under threat. And of course, nobody wants those tariffs to come about. They will harm the European economy, and they will also harm the American economy. But of course, the threat is there - 30%. It was 20 and then down to 10, and now it's up to 30, so we'll see. And then we already have tariffs - 50% on steel and aluminum and 25% on car and car parts. So it's a bad situation.
DETROW: Speaking for the EU side, what are the biggest priorities?
MALMSTROM: Well, ideally, we wouldn't have any tariffs at all, and the EU has offered to take away our tariffs on all goods on a reciprocal basis so that we would have a 0-for-0 trade. That has not been accepted by the U.S. side, of course. So what the EU is focusing on right now is to lower the tariff as much as possible and to get along the longest possible list for exceptions. But...
DETROW: Yeah.
MALMSTROM: ...We don't know whether that is possible.
DETROW: I'm curious. When you have conversations with people in your world, do you feel like this is a temporary thing, or do you feel like this is a permanent shift to the global trading order?
MALMSTROM: Well, it's definitely a shift to the global trading order when it comes to the U.S., but most countries of the world actually liked the trading order. Well, not China, maybe - but at least they confess doing it. But most countries - they want to have rules. They want to have predictability. We have WTO rules. They worked rather well. We need to update them, absolutely. But this is breaking supply chains all over the world, and it's creating a lot of turmoil, and we don't need that right now. But 82% of the EU's trade is not with the U.S. So of course, what we are doing right now is to try to de-risk from the U.S. and increase our trade relationships with the rest of the world.
DETROW: You mentioned before that the EU is just looking elsewhere. Does China ultimately benefit? Does China, do you think, fill the void that's being created as the U.S. puts up these walls?
MALMSTROM: No, we have a complicated relationship with China. Of course, we trade a lot with China, and that will continue, but it is complicated. We share many of the concerns that the U.S. has when it comes to illegal subsidies, when it comes to dumping, when it comes to dual use. And of course, for Europe, the biggest problem with China is that it sort of supports the Russian war economy in Ukraine. So that is probably going to - we'll keep on trading, but we don't see much change there.
So what the EU just done is to try to conclude an agreement with Indonesia. We are hopefully going to ratify an agreement with the countries of Mercosur - Brazil, Argentina, and Paraguay and Uruguay. There are negotiations going on with India. So trying to de-risk and to find new friends.
DETROW: Can I ask you just a question about negotiating itself?
MALMSTROM: Mhm.
DETROW: Everyone who lives in the world and has a phone is familiar with how President Trump approaches these negotiations. There are these declarations on social media, big announcements. The numbers change. They come. They go. They're put on pause. There's a lot of bluster and real threats.
MALMSTROM: Yeah.
DETROW: How do you negotiate with that? If you were sitting at this table, what would you take seriously? What would you not take seriously? How do you cut to the bottom of things with an administration approaching it in this particular way?
MALMSTROM: Well, that is what makes it so difficult. Last time he was president, he did the same thing, and I was trade commissioner at that time. And we managed, actually, to reach a small deal. It wasn't really big, but it was a small deal. And that was presented by President Trump as a big win, a big concession, and there were no further tariffs after that. But this time, I think he's more determinated. He's surrounded by very loyal people, and it is unpredictable. So that's why my successor - he's doing a great job, but it's really not easy to know because it's a lot - there's a lot of threats, and there's a lot of unpredictability, and it changes all the time.
DETROW: And how much - on that end, like, how much do the social media posts and the aside comments that President Trump makes in public? How much do they change what is happening at the tables? Or are they ignored at times?
MALMSTROM: Well, I think you have to choose your battles. You cannot react on every tweet that comes in there. The European Union is trying to be serious to show that, yes, we are willing to engage with the U.S., but those tariffs need to go down. And we are willing to invest more in the U.S., but again, tariffs need to go down. And if that is not happening, the EU just agreed on a very long list of possible retaliation measures. I hope we will not be used, but of course, if there's no deal, I mean, we can also do harm.
DETROW: That is Cecilia Malmstrom, nonresident senior fellow at the Peterson Institute for International Economics. Thank you so much.
MALMSTROM: Thank you for having me.
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