In this June edition of #TradeViews you will read about the EU’s many evolving relationships – the conclusion of the EU-UK’s big summit, the tug of war between Brussels and Washington DC, the delicate balance in the EU-US-China throuple and Šefčovič’s busy agenda that involves wooing Japan and UAE – plus an update on the pesky US AI chips controls.
Mates again?
The spark between the EU and the UK seems to have been rekindled. On 19 May, during the EU-UK Summit, the two blocks concluded several new accords (or rather declaration of intents) to reignite their ambiguous relationship following Brexit. The new deals cover a wide array of subjects, ranging from fishing and agri-food exports to energy and a commitment by the UK to participate in the EU defence fund.
Trade is one of the main dishes of the new deal buffet. Notably, the EU agreed to negotiate a sanitary and phytosanitary agreement with the UK to ease up border checks for agri-food exporters on both sides and facilitate the trade of animal and plant products across the Channel. While the EU represents the biggest agri-food market for the UK, after Brexit, British exports to the Union have seen a 20% drop in volume, leading to several UK businesses either scaling down or stopping trade altogether. The new agreement will also mean that the UK will now need to align with EU food safety rules, leading to concerns from certain farmers associations that it will require new commitments to EU rules on which the UK will have limited influence.
London and Brussels also struck a deal to give EU boats continued access to UK waters until 2038, with the UK maintaining control over the quotas of fish that can be caught by Union vessels. Several members of the UK Conservatives and Reform parties were quick to denounce the agreement, with Reform leader Nigel Farage referring to it as “the end of the [fishing] industry”.
Finally, the EU and UK agreed to raise the quotas for British steel exports towards the EU, allowing more tariff-free access for British steel products in the EU.
The Take: On several areas, the new accords package with the UK represents a declaration of intent rather than a formal commitment. Negotiations will still define several of the key areas of the deal and potential new ones. Notably, in the future, sectors such as chemicals and pharmaceuticals might lead to lengthy and complex negotiations due to their strategic nature.
Zoom in: While both parties welcomed the deal as a step forward for EU-UK relations, UK Prime Minister Keir Starmer is still sticking by his commitments not to rejoin the single market, to return to the customs union, and to reinstate freedom of movement for EU citizens.
The Next: Despite its complexities, the new accords overall signal the willingness from both the EU and the UK to start working together again. We will keep you posted about this reunion!
Sleepless in Brussels
As US President Donald Trump announced on Truth Social his intention to impose a 50% tariff on all European imports starting June 1, European businesses and policymakers quickly realised it wouldn’t be a relaxing weekend. The declaration came on a Friday afternoon, just hours before a scheduled call between EU Trade Commissioner Maroš Šefčovič and US Trade Representative Jamieson Greer and, like many of Trump’s moves in the early months of his presidency, it caught Brussels completely off guard.
Reports soon emerged that the Šefčovič–Greer call ended without progress, intensifying the sense of panic. However, by Sunday, European Commission President Ursula von der Leyen phoned the tycoon-turned-president and persuaded him to delay the tariff plan, at least until July 9.
In the meantime, the EU has outlined its strategy for handling the tariff threat. As disclosed by Commissioner Šefčovič, the EU’s primary objective remains a diplomatic resolution. Still, if talks fail, the EU is prepared to respond. The countermeasures include limitations on certain EU exports to the U.S. and retaliatory tariffs on American imports. More than 4,800 products, worth nearly €100 billion, are on the list, including passenger cars, medical devices, chemicals, plastics and a broad range of agricultural goods. Through this package, the Commission aims to pressure the Trump administration into lifting its tariffs. As EU officials have made clear, the Union won’t accept a discounted deal like the UK did.
While a much-hoped Trump–von der Leyen meeting, proposed by Italian PM Giorgia Meloni remains unconfirmed, negotiations continue. A delegation from the European Parliament, led by MEP Brando Benifei, has travelled to Washington to meet with US officials, lawmakers and other stakeholders to discuss EU–US political, trade and investment relations, all in the hope of giving a decisive turn to ongoing trade negotiations. However, as experts warn, the gap between Europe’s expectations rooted in free trade and the respect of international treaties on the one hand and the new reality of Trump’s America on the other maybe impossible to bridge.
US chipping away at the AI chips controls
Before the Trump 2.0 days, we told you about one of Biden’s last hurrahs – export restrictions on AI chips that divided countries into different tiers – tier 1 with unlimited access to American AI chips, tier 2 with capped access and reporting requirements and tier 3 – full ban. The big problem for the EU was that only some of Member States made it to tier 1, and those left out were not feeling great about it, including Poland. In good news for Warsaw (and others), the White House decided to rescind the controls to tier 2 countries two days before they were to take effect. This came after a campaign from Commissioners Šefčovič and Henna Virkkunen, as well as individual countries stuck outside the tier 1 list against the restrictions. Still, the EU executive is pushing ahead with the plans to review the Chips Act with the aim of having AI chips factories in Europe, in line with the broader tech sovereignty push. As of now, the bloc has a staggering -€20.8 billion deficit on chips, with demand largely outgrowing supply inside the EU market.
The confusing truce in the tariff war
Following a tit for tat between the US and China, which saw Washington lowering duties on Chinese imports from 145% to 30% and Beijing reducing those on American imports to 10%, Europe is also reconsidering its position vis-à-vis the Red Dragon.
Among others, MEP Bernd Lange, Chair of the European Parliament’s International Trade Committee, has proposed closer EU–US coordination to pressure China to tackle Beijing’s overcapacities, potentially including a “threat” to impose new duties on Chinese goods, mainly targeting Chinese steel. Notably, Lange hopes the possible new tariffs might “lead to proper discussions” between the EU and China and allow the two blocks to address the significant trade surplus Beijing maintains with Europe. A tougher stance on China might also strengthen the Union’s position with the US as it tries to negotiate its own deal with Washington. The EU will, however, need to find a balance between the need to strike an agreement with the US and the position of several Member States, some of whom are advocating to maintain reasonable trade ties with China.
Among others, Germany’s newly elected Chancellor Friedrich Merz recently spoke with President Xi Jinping to discuss the importance of maintaining strong trade ties, while Hungary referred to its trade links with Beijing as a “red line” in negotiations with the US. Commissioner Šefčovič as well travelled to Beijing for a recalibration of the bloc’s approach and is also scheduled to meet with the Chinese Commerce Minister in early June 2025, on the sidelines of a WTO ministerial meeting in Paris. Watch this space!
Big in Japan (and the UAE)
EU trade chief Šefčovič has his agenda full as he is drumming up enthusiasm for Brussels’ new (and old) trade partners. In early May, he travelled to Japan for a series of meetings aimed at reinforcing EU-Japan cooperation. Between a classical music concert celebrating Europe’s Day and a visit to Osaka Expo, Šefčovič talked business with ministers responsible for trade, economy and foreign affairs ministers – a 6th high-level economic dialogue of this sort. The ultimate goal is strengthening EU-Japan cooperation under the Economic Partnership Agreement, which entered into force back in 2019.
Not far from the country of the rising sun, Šefčovič is headed towards Abu Dhabi to kick off free trade agreement talks with the United Arab Emirates. The goal: to reach a deal that could significantly boost the EU-UAE trade, currently valued at €55.6 billion. If he pulls this off, the entire Gulf region is the EU’s oyster. As a reminder, the last round of FTAs negotiations with the Gulf Cooperation Council collapsed in 2008.
Over on X.
The art of the deal – straight from Maroš Šefčovič
https://x.com/MarosSefcovic/status/1926005845113852130
On our radar.
5-6 June | The European Economic Policy Centre is organising the Brussels Economic Security Forum, with open economic security and collaborative interdependence on the agenda.
11 June | Bruegel think tank gathers experts to discuss the cooperation between Indo-Pacific and Europe in support of rules-based trade order.
11-12 June | The German Marshall Fund of the US hosts its annual Brussels Forum studded with high-level speakers and attendees from both sides of the Atlantic.
What we’re reading.
International Trade Barrier Index 2025
The International Trade Barrier Index 2025 is out. It measures the most direct and indirect trade barriers imposed by 122 countries affecting 97% of global GDP and 80% of the world’s population. The direct trade barriers assessed by the index fall into three categories: Tariffs, Non-Tariff Barriers, and Services Restrictions. Among the countries with fewer tariff barriers in the world, the top three in 2025 are Hong Kong, Singapore and Israel.
A Free Trade Response to Fortress America
With US trade policy swinging back toward tariffs and transactionalism, the EU and Australia should resist the trap of bilateral deals and instead double down on a Euro-Pacific free trade alliance. This European Center for International Economy paper argues for a fast-track EU-Australia FTA, calling it the nucleus of a broader, open “trade club” in the Asia-Pacific. The goal? Send a clear signal: the rules-based system won’t wait for Washington.