Trump "releases positive signals," Europe has "new ideas," but reports say "key obstacles remain"

By Zhu Xueying, Wall Street Insights

When Trump began praising the EU, which he once called "milking America for all it's worth," investors sensed a dramatic shift—moving rapidly from a 50% devastating tariff threat to a July 9 ultimatum. This trade standoff is being pulled back from the brink at an astonishing pace. As a result, U.S. stocks surged, with the S&P 500, Nasdaq, and Russell small-cap index all rising more than 2% intraday, suggesting markets are betting that Trump will again yield under financial market pressure.

However, reports indicate that many EU officials and member states still believe some of Trump’s tariffs will remain in place long-term, and the prospect of reaching an ideal agreement remains slim. Insiders say any unilateral U.S. demands undermining EU autonomy in regulatory and tax matters will still be considered a "red line."

German Finance Minister Lars Klingbeil said Monday in Berlin: "We now need a quick solution." He added he was "cautiously optimistic" about reaching a deal but emphasized that the EU must respond to U.S. tariff threats in a united, coordinated, and consistent manner.

Dramatic Reversal Within Five Days

This thaw in trade relations unfolded within just five days.

According to CCTV News, on Friday, May 23 local time, U.S. President Trump posted on social media suggesting a 50% tariff on the EU starting June 1. Xinhua News Agency reported that on the 25th, U.S. President Trump said, after a phone call with European Commission President von der Leyen, he agreed to delay the implementation of the 50% tariff on the EU from June 1 to July 9. Earlier that day, von der Leyen posted on social media platform X that she had a "good call" with Trump, but "we need time until July 9 to reach a good deal." She stated the EU stands ready to move "swiftly and decisively" forward with negotiations with the U.S.

In response to Trump’s latest remarks, the EU has adopted a "new approach" and quickly adjusted its strategic focus. According to insiders, the European Commission will center its new trade strategy on key sectors such as metals, automobiles, pharmaceuticals, semiconductors, and civil aircraft—precisely those industries already facing or under threat of U.S. tariffs. In addition, the EU will continue working to resolve both tariff and non-tariff barriers.

The Real Challenges Behind the Negotiations

Despite the apparent easing, the negotiation outlook remains uncertain. Media reports show U.S. trade deficit data indicating that the U.S.-EU trade gap has doubled this year, primarily driven by front-loading imports—companies stockpiling goods ahead of potential tariff imposition.

A proposal put forward by the EU last week has already been rejected by the U.S., including mutual tariff reductions on various goods and cooperation on global challenges and joint investments, after which Trump threatened to raise tariffs further.

Retaliatory Measures Ready to Deploy

The EU is not unprepared. Media reports state the EU has approved retaliatory tariffs on $23.8 billion (€21 billion) worth of U.S. goods, which can be implemented immediately and are precisely targeted at politically sensitive U.S. states.

Additionally, the EU is preparing another list of tariffs covering €95 billion worth of U.S. products, targeting industrial goods such as Boeing aircraft, U.S.-made cars, and bourbon whiskey.

Markets may rejoice at the temporary relief, but the core logic of Trump-style trade bargaining remains unchanged: threaten, concede, then threaten again. Whether the six-week window can resolve this transatlantic trade crisis remains to be seen—perhaps only July 9 will provide the answer.