The European Union has decided to extend its suspension of trade countermeasures against the United States until August 1. This decision comes after the US administration threatened to impose 30% tariffs on EU goods. Ursula von der Leyen stated that the EU is open to resolving issues through diplomacy but is also preparing for additional tariffs. The EU has a list targeting €21 billion in US exports and a second list ready for an extra €72 billion if needed. Negotiations have stalled, especially regarding tariffs on cars and agricultural products. The EU wants to keep farm tariffs at 10% and is hesitant to accept investment-linked tariff offsets due to worries about production moving to the US. Negotiators are currently focusing on car tariffs as a potential way forward. German Chancellor Friedrich Merz warned that a 30% tariff from the US could greatly harm Germany’s economy. What is clear from recent developments is that trade tensions between the EU and the US are still tense, but being managed—for now. The extension until August provides breathing room, indicating a tactical delay rather than a resolution. Von der Leyen insists that diplomacy is the preferred approach, but her mention of prepared tariffs suggests a more forceful intent. There is readiness behind her words. The EU’s two-tiered tariff plan—with €21 billion in immediate assets and €72 billion in reserve—acts as a pressure valve and a negotiating tool. By distinctly outlining these figures, the EU demonstrates its willingness to escalate if provoked but prefers to avoid confrontation. Agricultural talks have made no progress. The EU seeks a clear cap of 10%, while the US appears to offer investment packages as concessions. The EU is concerned that investment can easily move, while tariffs are blunt tools that won’t secure local production. Thus, they refuse to engage further, as failing to protect local industries could backfire politically, especially in regions wary of external competition. Now, the focus has shifted back to cars. Automotive discussions may provide solid ground for negotiation, as the car industry plays a critical role in many European economies, particularly in manufacturing regions that export to the US. Merz’s warning carries significant weight; Germany’s supply chains, including workshops and consultancies, would struggle under a steep tariff increase. If Germany’s economy falters, it could impact other EU nations. Looking ahead, we are keeping an eye on discussions for anything concrete, like a revised tariff schedule or clear communication from Washington. Certain vulnerabilities are becoming more apparent, especially regarding contracts linked to bilateral trade, such as those involving capital goods and raw materials. What does this mean for the upcoming weeks? Trade-related instruments in affected sectors—like agriculture, cars, and engineering—will need more robust risk management. Longer-term options might require re-evaluation if full tariffs are enacted. Delays in adjustments are not an option, as the market won’t wait for negotiations to conclude. Escalation is still a real possibility. Even without new policies this month, market behavior indicates a cautious sentiment. We’ve seen this delaying tactic before—a reprieve masked as diplomacy. It’s essential to recognize it for what it is: a pause, not a change in direction. The tariffs might be postponed until late summer rather than the spring, but traders should anticipate their arrival. It’s wise to plan accordingly.

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