European and American tariff negotiations are deadlocked, EU economy faces multiple pressures

**Source:** Xinhua News Agency  

The U.S. government's current confrontational trade policy stance has slowed down tariff negotiations between Europe and the U.S. Meanwhile, growing global trade fragmentation, weak external demand, and uncertainties in U.S. tariff policies are dragging down the European economy, making it difficult for the already fragile European economic recovery to find momentum and facing severe challenges.  

**Significant Divergence in Negotiation Demands**  

Tariff negotiations between the EU and the U.S. have entered a restart phase, but uncertainties remain. From the perspective of divergent demands, the EU is willing to make concessions on purchasing U.S. natural gas, weapons, and agricultural products, but will not accept U.S. demands to abolish value-added tax, weaken digital regulation and taxation, or lower food standards.  

Currently, the U.S. continues to impose 25% tariffs on EU steel and aluminum products and automobiles, maintains a 10% "benchmark tariff" on almost all other goods, and threatens to impose additional tariffs on pharmaceuticals, semiconductors, copper, timber, critical minerals, and aerospace components. In early May, the EU launched a public consultation on a list of goods worth nearly 100 billion euros in response to U.S. tariffs. At the same time, the EU will file a lawsuit with the WTO against the U.S. "reciprocal tariffs" and tariff policies on complete vehicles and auto parts. The EU has stated that if negotiations fail to achieve mutually beneficial results and prompt the U.S. to remove tariffs, it will take countermeasures.  

Sabine Weyand, a senior trade official at the European Commission, reminded member states that the EU must remain calm and should not pursue a "quick fix" to avoid falling into the U.S. rhythm. She also warned that some U.S. tariffs may remain in place for the long term, particularly in key sectors where the U.S. hopes to bring back production, such as steel and automotive manufacturing.  

Trade ministers from multiple EU countries made it clear that the recent U.S.-U.K. agreement is not a template for the EU. Benjamin Dussa, Sweden's Minister for International Development Cooperation and Foreign Trade, said, "We are not pleased with such agreements," and the U.S. should be prepared to face EU countermeasures.  

**Worrisome Prospects for Key Industries**  

Uncertainties in U.S. trade policies are causing severe shocks and far-reaching impacts on core European industries such as automotive and pharmaceuticals. Data from Eurostat shows that pharmaceuticals, automobiles, and machinery products accounted for nearly half of EU exports to the U.S. in 2024. In the short term, due to tariff shocks and increased trade war uncertainties, many European automakers and machinery manufacturing enterprises are facing sales and investment losses, with many car companies' expansion or investment projects put on hold and some sales orders delayed.  

European automotive giants such as Stellantis and Mercedes-Benz have canceled this year's performance forecasts. Relevant companies have pointed out that if current trade barriers persist, their operating profits, cash flows, and profit margins will be impacted.  

Andrew Adair, North American trade advisor for the German Mechanical Engineering Industry Association, said that due to too many policy variables, German industrial investment in the U.S. seems to be hitting the "pause button."  

Recent developments suggest that the pharmaceutical industry may become the next sector after automobiles to face high U.S. tariffs on trade partners. On the other hand, U.S. President Trump signed an executive order on May 12 to drastically reduce domestic drug prices in the U.S., aiming to cut drug prices by 59% to 90%.  

Nearly 30 global pharmaceutical giants, including AstraZeneca, Pfizer, and Eli Lilly, jointly wrote to European Commission President Ursula von der Leyen in April, urging the EU to take measures to promote the development of the European pharmaceutical industry and respond to potential U.S. import tariffs on pharmaceuticals. Relevant companies fear that pharmaceutical tariffs may lead to industrial relocation to the U.S., causing consumers to bear higher drug prices or even drug shortages.  

A recent internal survey by the European Federation of Pharmaceutical Industries and Associations of 18 large pharmaceutical companies showed that factors such as Trump's tariff threats could lead to a gradual shift of pharmaceutical research and development and production from Europe to the U.S. The survey noted that if tariff policies remain volatile, projects accounting for 10% of total investment plans, or approximately 16.5 billion euros, could shift from Europe to the U.S. within the next three months; over the next five years, more than 100 billion euros of European investment plans may also shift across the Atlantic.  

**Erosion of Recovery Momentum**  

Weak external demand and uncertainties in U.S. tariff policies have dampened market confidence and deepened concerns about global trade fragmentation and the outlook for European economic growth. Analysts point out that uncertainties have hit investment and consumption willingness even more than tariffs themselves, and even if EU-U.S. tariff negotiations yield satisfactory results, their negative impacts will remain significant.  

The European Commission's spring 2025 economic outlook report released on the 19th showed that due to weakening global trade prospects and increased uncertainties in U.S. trade policies, the institution has significantly downgraded its economic growth forecasts for Europe. The report predicts that the EU's real GDP will grow by 1.1% in 2025, and the eurozone by 0.9%; in 2026, EU economic growth will be 1.5%, and the eurozone 1.4%, both lower than previous forecasts.  

Valdis Dombrovskis, the European Commissioner for Economic Affairs, said that U.S. tariff policies have significantly increased global economic uncertainties, and the EU must take decisive action to enhance competitiveness by removing internal market barriers and making domestic demand a more powerful driver of economic growth.  

Maarten Verwey, Director-General for Economic and Financial Affairs at the European Commission, noted that survey data shows that EU household and business confidence has significantly deteriorated due to uncertainties in U.S. trade policies, which may lead to reduced consumption and delayed investment. Against this backdrop, expanding and deepening trade partner networks is more important than ever, as it not only helps diversify trade and enhance economic resilience but also serves as a key to enhancing the EU's attractiveness as a reliable gateway to global markets for businesses.  

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