Europe Waves The White Flag: EU Prepares “Term Sheet Of Concessions” For Trump Trade War

In what may be the first clear confirmation Trump’s plan to realign the global trader system is working, moments ago Bloomberg reported that the European Union is identifying concessions it’s willing to make to Donald Trump’s administration to secure the partial removal of the US tariffs that have already started hitting the bloc’s exports and that are set to increase after April 2.  

According to Bloomberg, EU officials were told at meetings this week in Washington that there was no way to avoid new auto and so-called reciprocal tariffs that Trump is launching next week. Discussions also began on what the contours of a potential deal to reduce them should eventually look like.

That prompted the European Commission (which handles trade matters for the EU) to start working on a “term sheet” for a potential concession agreement, which would set out areas for negotiations on the punitive trade measures, including lowering its own duties, mutual investments with the US as well as easing certain regulations and standards.

In short, Europe – led these days by France’s Macron – did what Europe always does when led by the French: it surrendered.

The reciprocal tariffs which will be unveiled on April 2 are meant to strike out against what Trump considers to be unfair levies on US goods as well as non-tariff barriers, such as domestic regulations and how countries collect taxes, including the bloc’s value-added tax, digital taxes and regulations. The EU says its VAT is a fair, non-discriminatory tax that applies equally to domestic and imported goods (for more on the framework for Trump’s reciprocal tariffs, see this).

The news, which is actually rather bad for Europe as it confirms the continent will be unable to retaliate fully and instead will be on the receiving end of Trump’s trade war, sparked a brief rally in the Euro…

… however we expect this to promptly reverse once algos realize that Europe’s ad hoc capitulation means that the US now has the unconditional upper hand.