Trump Warns EU Would Face Higher Tariffs if It Doesn't Fulfill Investment Pledge

TMTPOST -- U.S. President Donald Trump on Tuesday warned that the European Union would face higher tariffs if the bloc doesn’t meet its pledge on investment.

Credit：China Central Television

Trump in a CNBC interview said the pledge to invest $600 billion in the U.S. was one of the reasons that he had brought down its planned tariffs on the EU to a blanket 15% rate, so if it fails to live up to the pledge, the tariff rate will be raised back to 35%, the level higher that that he threatened last month.

"A couple of countries came [and said], 'How come the EU is paying less than us?' And I said well, because they gave me $600 billion," Trump said. "And that’s a gift, that’s not like, you know, a loan," he said, claiming that the terms allow the US to direct where the EU invests.

Trump on July 13 released his letter to European Commission president Ursula von der Leyen, dictating 30% tariffs on the EU exports starting August 1. Following his in-person meeting with ven der Leyen on July 27, Trump that day said the U.S. would set a baseline tariff of 15% for most European goods, including automobiles, and the EU had agreed as part of the deal to buy $750 billion of energy products from the U.S. and invest an additional $600 billion in his country.

Trump claimed a “straight-across tariff of 15%” for “automobiles and everything else,” adding that U.S. exports to Europe would face a 0% rate. As a the centerpiece of the U.S.-EU agreement, a fact sheet unveiled by the White House on July 28 confirmed the EU’s committed energy purchases worth of hundreds of billions of dollar.

“The EU will double down on America as the Energy Superpower by purchasing $750 billion of U.S. energy exports through 2028,” the White House said in the release, suggesting the purchases will not just strengthen the U.S. energy dominance, but reduce European reliance on “adversarial sources” like Russia.

Von der Leyen the same day said the 15% tariff level “is the best we could get”, and the level would cover cars, which were subject to duties of 27.5%, semiconductors and pharmaceuticals, which the Trump administration has not impose any new tariffs yet but signaled extra duties would come on the horizon. Both sides had not taken any decision on tariffs regarding wine and spirits, she added.

EU officials said the two sides agreed on a quota, above which the 50% tariffs on steel and aluminum imports would apply, but U.S. officials said nothing had been agreed upon. The U.S. under the deal will grant exemptions for about €70 billion of trade, according to Brussels. Von der Leyen announced that zero-for-zero tariffs will apply to "all aircraft and component parts, certain chemicals, certain generics, semiconductor equipment, certain agricultural products, natural resources, and critical raw materials."

Von der Leyen the same day said the 15% tariff level “is the best we could get”, and the level would cover cars, which were subject to duties of 27.5%, semiconductors and pharmaceuticals, which the Trump administration has not impose any new tariffs yet but signaled extra duties would come on the horizon. Both sides had not taken any decision on tariffs regarding wine and spirits, she added.

The EU on Monday said it would pause the retaliatory tariffs that are set to come into effect on Wednesday by six months as it continues to work with the U.S. to finalize a joint statement.The EU still expects turbulence in trade relations with Washington, but it believes it has a good insurance policy thanks to a framework deal that covers most goods it exports to the U.S. by a maximum 15% tariff, including cars and car parts, Reuters cited a senior EU official on Tuesday.

"We do expect further turbulence, but we have a clear insurance policy - the 15% tariff across the board. If the U.S. administration does not stick to that, we have the means to react to that," said the official. While not providing a timetable, the official said talks on a joint statement are very advanced, with the text broadly ready and the EU waiting for a response from Washington to finalize things.

The EU continues to push for exemption from a baseline 15% tariff for its wine and spirit exports as part of trade deal with the U.S., according to the Wall Street Journal on Tuesday. It cited an EU official that negotiators are working to get as many products as possible included in a list of exemption from that tariff rate, and there are a range of products—including medical devices and chemicals—that European policymakers believe should be exempted.

The EU was also reported to expect that cork and cork-related products could be on the list of exemptions in the future.EU officials highlighted that the 15% baseline is an “all-inclusive” tariff rate, which means it won’t be stacked on top of existing tariffs, per the report. The officials expected pharmaceutical and semiconductor exports from the EU would be capped at 15% if the Trump administration imposes those sectoral tariffs.