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Info Service on WTO and Trade Issues (Jul25/15) Geneva, 14 Jul (D. Ravi Kanth) — The European Union, Mexico, and Canada are seemingly crumbling under the spectre of tariffs by United States President Donald Trump over the past four days, while the World Trade Organization has remained resolutely silent, in what appears to be a reinforced “new normal” in the worsening global trade war, said people familiar with the development. The EU appears to have delayed its earlier decision to impose retaliatory tariffs on 21 billion euros worth of goods from the US that was to come into effect on 15 July as it plans to reach an agreement with Washington, following President Trump’s decision to impose a 30% tariff on EU goods from 1 August. This has come despite French President Emmanuel Macron’s call for resolute action against the US announcement on the reciprocal tariffs. Writing on the social media platform X, President Macron said that “along with the President of the European Commission, France shares the same very strong disapproval at the announcement of horizontal 30% tariffs on EU exports to the United States from August 1st.” However, the European Commission’s President, Ms Ursula von der Leyen, said on 13 July that the application of tariffs on 21 billion euros worth of US exports to the EU, including chicken, motorcycles and clothes, which were due to come into effect on 15 July, would be suspended until “early August”. “We have always been very clear that we prefer a negotiated solution with the US. This remains the case,” she said, according to a report in the Financial Times. In what is proving to be an extremely murky and uncertain phase, President Trump upped the ante on several countries starting with Canada on 10 July, followed by the EU and Mexico, respectively, on 11 July. For example, writing in his social media website Truth Social on 10 July, President Trump said that “instead of working with the United States, Canada retaliated with its own Tariffs [of 20% over the alleged fentanyl crisis]”. Therefore, “starting from August 1, 2025, we will charge Canada a Tariff of 35% on Canadian products sent into the United States, separate from all Sectoral Tariffs [50% tariff on steel and aluminum products and 25% tariff on automobiles and auto parts among others]”. President Trump also warned Canada that he could impose a transshipment tariff as well, ostensibly aimed at China allegedly shipping products through third countries. He further said that Canada or companies in Canada will be exempted from these tariffs if they decide to build manufacturing facilities in the US. President Trump’s tariff letter to Canada contains another warning that “if for any reason you decide to raise your Tariffs [on American goods entering the Canadian market], then, whatever the number you choose to raise them by, will be added onto the 35% that we charge.” President Trump told Canada that “the flow of Fentanyl is hardly the only challenge we have with Canada, which has many Tariff, and Non-Tariff, Policies and Trade Barriers, which cause unsustainable Trade Deficits against the United States,” including high tariffs on US dairy farmers. Canada, however, appears to have accepted the “Trumpian reality” without a fight or retaliation. The new Canadian Prime Minister Mr Mark Carney, unlike his predecessor Justin Trudeau, indicated in a post on the social media platform X on 10 July that Canadian officials would work with their US counterparts to clinch a deal by 1 August. Instead of building an alliance with other countries facing the reciprocal tariff threat by President Trump, Canada has resigned itself to a future deal that will likely include some tariffs, media reports have suggested. President Trump on 11 July announced that the EU will be subjected to a tariff of 30% on all its goods entering the American market, “separate from all Sectoral Tariffs.” Like the tariff letter sent to Canada on 10 July, the letter to the EU also contained almost the same level of threats plus a demand for zero-tariff access to all American products entering the EU, “in an attempt to reduce the large Trade Deficit.” The EU was also threatened with a transshipment tariff, in an apparent attempt to isolate China, said people familiar with the development. In another tariff letter sent to Mexico on 11 July, President Trump announced a tariff of 30% on all Mexican goods entering the American market from 1 August. According to the letter, since Mexico has not done enough to stop the alleged cartels, “who are trying to turn all of North America into a Narco-Trafficking Playground”, President Trump said that he has been forced to impose new tariffs on Mexico. Mexico, which is the largest supplier of goods to the US, will be subjected to additional tariffs if it retaliates against the new tariff of 30% that will be imposed on 1 August, according to President Trump. ESCALATING TRADE WAR President Trump appears to be rather unruffled by the global criticism over his expanding scheme of seemingly “extortionary” tariffs, which allegedly forms part of the new US “power game”, said people familiar with the development. His tariff letters seem to revolve around unjustifiable claims by focusing largely on the US trade deficit with various countries and then moving onto issues that appear political in nature, such as the 50% tariff threat against Brazil on grounds of the alleged “witch hunt” by the current Brazilian administration against the former Brazilian President Jair Bolsonaro. Instead of settling the US trade deficits with countries that secured the trade surpluses by following the global trade rules, President Trump seems to be constantly shifting the goal-posts. He said that he would consider lowering the tariffs if the EU offers “complete, open Market Access to the United States, with no Tariff being charged to us,” and if Mexico does more to combat the drug cartels, which he said are trying to turn “all of North America into a Narco-Trafficking Playground.” The newly announced 30% tariffs against the EU would replace President Trump’s existing 10% blanket tariffs on most goods from the bloc, according to a Wall Street Journal report of 13 July. “He has previously threatened levies of 20% and 50% against the bloc”, while “the newly announced tariffs also would replace the 25% tariff on Mexican goods that don’t comply with the US-Mexico-Canada free trade agreement,” according to the WSJ report. For the past several weeks, the US held sustained discussions with the EU in search of an interim deal, but President Trump’s latest tariff letter is a reflection of how goal-posts could be changed according to the US demands, suggesting that there is no guarantee that what an affected country or bloc agrees to today will remain the same tomorrow, said people familiar with the development. It also remains unclear if the United States-Mexico-Canada Agreement (USMCA)-compliant goods would still be exempt from the new tariffs imposed on Mexico after 1 August, as the White House has said would be the case with Canada. The tariffs would hit products from two of the US’s largest trading partners. Taken together, the 27-nation EU is the US’s largest trading partner, with $975.9 billion in two-way goods trade in 2024, according to the US Trade Representative’s office. On a nation-by-nation basis, Mexico is the US’s largest trading partner, with nearly $840 billion in two-way goods trade in 2024. Meanwhile, a senior Mexican trade official who is currently negotiating with the US said, in apparent reference to President Trump’s tariff letter to Mexico, that, “We said in the working group that it was unfair and that we disagreed.” Mexico, which exports goods to the US ranging from beer and tequila to automobiles and flat-screen TVs, has backtracked from initial plans to impose retaliatory tariffs against the US in part because of the damage that such measures could inflict on Mexico’s export-led economy. European Commission President Ursula von der Leyen said that “the EU is ready to keep working to reach a deal with the US by Aug. 1 and has consistently given priority to a negotiated solution.” “At the same time, we will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures, if required,” she said on 12 July. Though the EU has prepared a list of US goods that could be subject to retaliatory tariffs, it has refrained from imposing them on grounds that it could worsen the overall trading relationship with the US. It is somewhat unclear as to how far the 27-member bloc is willing to go to satisfy President Trump’s seemingly egregious demands. All this is happening at a time when the EU is toying with the idea of creating a “parallel” WTO with the countries of South-East Asia, said people familiar with the development. Ambassadors from the bloc’s 27 member states were due to meet with representatives from the European Commission on 13 July to discuss President Trump’s letter and the EU’s response. “Few economies in the world match the European Union’s level of openness and adherence to fair trading practices,” Von der Leyen declared. Earlier, the EU had also sought relief for Europe’s automotive sector, which currently faces US tariffs of 25%, although it was unclear in recent days if the two sides could agree on a way forward to resolve that issue, said people familiar with the development. +
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