← Brussels Playbook Podcast
Brussels Playbook Podcast
The €2 trillion question: Inside the battle over the EU's budget
00:38:11
Trillions of euros, almost as many priorities — and just over two years to agree. The European Commission has unveiled its sweeping new seven-year budget proposal, and the fight over where the money goes is already heating up.
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- [00:02]
Narrator/Advertiser
Well I was down on my last.
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Gregorio Sorghi
Dollar and then I started saving Cause the bank said fiscal restraint is what.
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Bartosz Brzezinski
You'Re craving So I put my earnings.
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Gregorio Sorghi
In a high yield account Let the savings compound and the interest mount I'm optimizing cash flow putting debt in check now time is my friend and not a pain in the neck and we've.
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Narrator/Advertiser
Got a little cash to rebuild the.
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Sarah Wheaton
Old deck Boring money moves make kinda lame songs but they sound pretty sweet to your wallet brilliantly boring since 1865.
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Narrator/Advertiser
Ford was built on the belief that.
- [00:33]
Sarah Wheaton
The world doesn't get to decide what you're capable of. You do. So ask yourself can you or can't you?
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Narrator/Advertiser
Can you load up a Ford F150 and build your dream with sweat and steel?
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Sarah Wheaton
Can you chase thrills and conquer curves in a Mustang? Can you take a Bronco to where the map ends and adventure begins?
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Narrator/Advertiser
Whether you think you can or think.
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Sarah Wheaton
You can't, you're right. Ready, Set.
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Narrator/Advertiser
Ford.
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Sarah Wheaton
You want to know the real secret behind making the European Union work? Behind holding together 27 different countries with their widely varying languages, cultures, political priorities and economies? A whole lot of money. The European Commission just unveiled its new proposal for how the EU should spend its cash for seven years, starting in 2028.
- [01:27]
Camille Gies
It is a budget that matches Europe's ambition, that confronts Europe's challenges, and that strengthens our independence. The budget is larger, it is smarter, and it is sharper, it is more strategic, more flexible, more transparent.
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Sarah Wheaton
Depending on how you count, it clocks in at around 2 trillion euros. And this money can be spent on a dizzying variety of things from a student semester abroad in Spain or a tram line in a small Romanian city, or producing a movie or helping a dairy farmer make ends meet. How about improving defense infrastructure or researching the next pandemic vaccine? And hey, don't forget those MEP salaries. 720 of them are making almost €11,000amonth. Someone's got to handle that payroll. Trillions of euros, seemingly trillions of competing priorities. And now two years to get everyone on the same page. It's a zero sum game. And based on how the discussion kicked off this week, negotiations are not going to be pretty. So what does this budget really say about Europe's priorities? With the war in Ukraine still raging, Trump threatening tariffs and pressure mounting at home, is Brussels gearing up for the future or just rearranging old fights? And after a chaotic rollout, with delays and immediate pushback even from her own allies, can Ursula Fonderlyen keep her vision intact? Or will we end up with a watered down compromise that everyone hates. I'm Sarah Wheaton, host of EU Confidential. Later in the episode, we'll break down the layers on Trump's tariff threat. Last week he announced plans to slap a 30% duty on EU exports. Brussels and several national capitals were caught scrambling. Should they keep appeasing Trump in hopes of striking a deal or go all in and hit back with retaliation? They've been preparing for months. But first, the budget. I'm now joined by my colleagues, Politico's financial services reporter Gregorio Sorghi and and our agriculture reporter Bartosz Brzezinski, to unpack the commission's new budget proposal for 2028-2034. Okay, so I like forced myself to tune in to some of the discussion in the Parliament about the budget. I expected it to be like extremely boring, but I wanted to prepare for this discussion. And as soon as I turn it on, it's one of Fonderlay's own political allies going on this huge rant about how angry he is about the budget, about the process. And then I'm seeing all these messages about how the von der Leyen's own press conference was totally screwed up. Gregorio, this seems like total chaos. What happened?
- [04:32]
Gregorio Sorghi
Yeah, well, Sarah was a big fiasco from a comms PR point of view. And I think it was the moment when the, you know, the simmering tensions around VDL's very centralized way of handling the commission exploded because the way the preparation to the mff, usually it's a very collegial process. All the commissioners and the directorates generals are involved, while this time there was a big change because the process was heavily centralized and this has created bad blood. So this is the backdrop. And why does it matter to what happened on Wednesday? Because I think there was a feeling that the other commissioners were kept in the dark until very late and the commission president stuck to her gun until the very last minute. And then there came a point where she had to make concessions because commissioners such as the agri Commissioner Hansen weren't ready and willing to swallow massive cuts to the farm budget. We've seen the same pattern with many other commissioners. So there came a point where she had to make concessions, but it was very late and that's why it was very messy.
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Sarah Wheaton
And we're talking about all of these negotiations that took place place before the announcement. But the good news, bad news is that they've got two years to now fully negotiate all of this. So Gregorio, sticking with you, can you just Give me kind of big picture. What is the mff? The multiannual financial framework. What types of things are in it?
- [06:07]
Gregorio Sorghi
The mff is the EU central budget. The current budget is worth 1.2 trillion over seven years. Now the commission wants to increase it to to 1.81 plus the repayments of the post Covid debt. That would take it to almost 2 trillion. And it includes the EU central spending on everything from agriculture payments to poorer regions, cultural programs, defense, you name it. It's very politically controversial in Brussels, obviously because each commissioner and each lobby group wants to have a bigger share of the pot for them.
- [06:45]
Sarah Wheaton
All right, Bartosh, we mentioned that there were these potentially big cuts to agriculture funding. Can you walk us through that and what the reaction is?
- [06:54]
Bartosz Brzezinski
Yeah. So the Common Agriculture Policy was created in those early decades after World War II to essentially feed the European continent, to help farmers make enough money to produce basic foods. Over the decades, it's been slowly reformed to be a more market driven mechanism, but it's still essentially seen as that top up for farmers who work in the field. And it does consume a lot of money. It takes one third of the EU budget, roughly. Economists say it's an inefficient social safety net. Farmers say it's not enough. So no one's satisfied with what they have. But any attempts to reform it are essentially face a wall. So as Gregorio was saying, there was internal pushback inside the commission. Christophanssen, the Agriculture Commissioner, backed by farm lobbies, agriculture ministers, parliament, lawmakers, he really put up a fight to preserve as much of the structure and funding, but also to protect it from repurposed for other more strategic objectives. And you gotta give it to him. What came out Wednesday preserves more than some expected. He was trying desperately to sell it as a win, the 300 billion, down from 386 billion that we have right now, saying that this is just the minimum that governments will be able to top it off. But it's a bittersweet, sweet victory because when he arrived in the Parliament, he faced angry lawmakers in the streets. He faced hundreds of angry farmers. Farmers treat it almost as a given that they have that money. So for them, the red lines were wonder. Leyen may have her single budget, may have her big reformed budget, but the Common Agricultural Policy is not hers to touch.
- [08:29]
Sarah Wheaton
There was an effort to kind of modernize the way the EU spends its money, faced some resistance. I'm thinking back to now, the previous mff, it was pre Covid, pre Ukraine war, pre Trump's trade war. It was in just a completely different era, but now we have. We have those and other big challenges. Does the proposal address them and what are the key ideas that the commission is putting forward? Gregorio?
- [08:55]
Gregorio Sorghi
I think von der Leyen's big idea was to have a major reform of the budget, which is traditionally hard to reform because there is just so much resistance. So the big idea was to tie payments to reforms in order to make European countries more competitive and to lump cohesion, which is money to poorer regions, which represents another third of the EU budget and agricultural payments, into this single fund, which would have given the commission more power to impose reforms and to get countries to do the reforms that it had recommended. And this was also indirectly a way of cutting cohesion and agri, which were seen as policies of the past. Although the commission would never say this publicly, what was presented on Wednesday, obviously it keeps into consideration this blueprint. But there has been a push by people like Hanssen or Italy's Raffaele Fito, who's in charge of cohesion, to keep the new budget as close as possible to the current one, because that was a way to save their policies. I think the jury is out on whether they have achieved this and the extent to which they have pushed back on von der Leyen's ambitious reforms. But I think that overall, the internal critics of this blueprint have achieved quite a lot, simply because this is such a presidential commission where von der Leyen is so powerful. So I think that overall, if you judge Wednesday's proposal against this backdrop, what they have achieved is not something that we should take for granted, although farmers and regions will say that it's not enough and that it's a big sellout compared to the current budget.
- [10:42]
Sarah Wheaton
So we're talking about all this money. Can you walk us through how this budget proposal compares to the previous budget proposal? And then also, where is all this cash going to come from?
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Gregorio Sorghi
Compared to seven years ago, the proportion of the budget that goes to agri and regions is lower because last time it was as high as two thirds. And we've seen the new priorities instead that have come up over the last seven years better reflected. There is more money for competitiveness per se, where there is a specific European competitiveness fund, there is more money for defence. There is a 100 billion cash boat for Ukraine, which is quite significant. And from that point of view, von der Leyen has been able to better adapt the budget to the current needs and to the current priorities. But the, quote, unquote, old priorities have still been kept alive. And they still represent a significant part of the budget. And in terms of where the money comes from, the commission sold this as a, you know, you can have your cake and eat it because they told national governments, on the one hand there will be a bigger budget, but on the other hand you won't have to pay more into it because we will propose three new EU wide taxes on tobacco, on electronic waste and on big companies. And that means that that revenue will flow in the budget. In reality, you know, many member states think that all of that is not true and it's pure pr because at the end of the day, these new tax proposals, which are expected to generate an extra 58 billion per year, are very controversial. Especially this tax on big business is annoying many member states because it would target businesses with a turnover of at least 100 million, which is big but not gigantic. So many companies stand to lose from this tax.
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Sarah Wheaton
Most companies are just big enough to be influential in their capital, but not so big that they can just easily take on this extra cash.
- [12:51]
Gregorio Sorghi
Yeah, exactly. And I think the broader point, which is almost philosophical, is that many countries don't like it when the EU tries to take revenue from their budgets to the European budget. So it's de facto a transfer and it's really about us increasing our contributions to the EU budget through the back door.
- [13:10]
Sarah Wheaton
Yeah. And we already heard on Thursday morning that Germany was saying this is completely unacceptable. Bartosz, what is some of the reaction that you referred a little bit to, but can you tell us a little bit more about the reaction that you've been hearing so far?
- [13:23]
Bartosz Brzezinski
Well, I mean, so as Gregoria was pointing out, what Fito managed to achieve is that a lot of the cohesion money will still be devoted to the poorer countries. And even though country that I come from, Poland is becoming one of the biggest economies in Europe, they celebrated this budget as a victory because Poland is becoming the biggest beneficiary of this fund. Another not so far south country, Hungary is taking this budget as a gift to Ukraine. In its anti Ukrainian messaging, this pot of money that is set aside for Ukraine, Hungarian agriculture minister said essentially that von der Leyen is selling out European farmers to Ukrainian Agrippa businesses. It's not true, but it works. If you can blame someone, blame Ukraine, I guess. So there are mixed feelings, but essentially there's also confusion in Brussels. Speaking to lawmakers in the European Parliament, national officials attaches they're still looking at the numbers, trying to figure out what exactly does it mean for agriculture. There is a bit of A worry that this budget could lead to fragmentation in the eu, with some countries pushing further ahead and others lagging behind.
- [14:27]
Sarah Wheaton
And so, yeah, we'll see more tractors in the streets.
- [14:29]
Bartosz Brzezinski
Yeah, definitely. That's what we've heard. And I spoke to the leader of the Copacojeca group farming lobby, who said basically this budget proposal is a declaration of war. He previously said that he has his tractor at home in Italy and he's ready to take it out into the streets.
- [14:45]
Sarah Wheaton
We've been talking kind of about the individual parts or kind of the chunks of the budget. But, Grigori, I'm pretty enumerate, I will acknowledge, so I need you to help me understand something. So the current MFF is 1.2 trillion. And then I saw these kind of headline figures of, you know, around 1.8 to 2 trillion for the new MFF. So to me, with my crappy math skills, that seems like the new MFF is much bigger than the old one. And yet there has been debate about whether that is actually the case or not. Can you help me sort this out?
- [15:22]
Gregorio Sorghi
Yes, Sarah, Intuitively that would be the reaction. But things are a bit more complicated because, as usual in Brussels, because the figures in the new budget include inflation, so they're higher. So I think that if you want to really understand whether this new budget proposal is bigger than the current budget, you need to look at the percentage of GNI of gross national income. So you need to see it as a proportion of the total size of the EU economy. And the current budget from 21 to 27 is 1.1%, whereas the new budget proposal would be 126%, including the post Covid debt repayments. Without that, it's 1.15. So it's not a big increase compared to the current budget. It was confusing for me on Wednesday because when I first saw the figures in the European Parliament, I saw the big headline figure of 2 trillion, which was a surprise because it seemed like a lot. And then I started adding the figures and it was stressful because I had to write my story. So I started adding the figures and I saw that it added up to 1.816 trillion. And where's the catch? Is that the difference between that lower figure and the 2 trillion that von der Leyen has trumpeted in her press conference are the repayments of the post Covid debt. Why is that controversial? Because obviously this is a payment and an expense that the EU has to undertake. But this is not money going to the beneficiaries of the EU budget, it's not going to farmers or to regions, but going to financial institutions which have lent the EU its money. So that's why MEPs were very critical. They accused the Commission of playing with figures and of misleading them. And we also need to take into account that the Commission's proposal is usually a bit higher than the final agreement because national governments usually push down the total figure. So I think if you keep all of that into account, it's not that big, although you'll always have, and as we've had on Wednesday, the frugal saying, oh wait, this is too big. There's no way we're accepting this because we don't want to pay more. But those arguments were always going to be there.
- [17:46]
Sarah Wheaton
Yeah. So as you said, Gregorio, we kind of have this classic debate between, you know, the so called frugal countries. They're the countries that tend to be paying more into the EU than what they get back versus the countries that are like, yeah, you know, if we want to have one united, equal eu, then we need a little bit of extra help. That's a normal debate that we can expect. What are some of the other big fights that you're bracing for over the next two years?
- [18:12]
Gregorio Sorghi
I think there will be a push by countries like Poland or the other Eastern European countries to prevent the budget for poorer regions from being cut because they are the main beneficiaries. So they'll be fighting hard on that front, whereas the frugals will be fighting, starting to cut the agri and the regional budgets and increase the amount of money that goes towards competitiveness. So that will be perhaps a new dynamic that we'll see in these new budget negotiations, where on the one hand you have the old priorities, quote unquote, that appeal to poorer countries and to countries with a big agricultural sector. And then on the other hand you have these new priorities like competitiveness, which will appeal more to the richer countries in Northern Europe. Oversimplifying it, obviously, they have more of an interest because they are richer countries, they have a higher proportion of high tech and developed industries. So I suppose that they stand to gain more from the competitiveness fund, whose very idea is to promote these cutting edge technologies and to advance Europe's industrial output. Whereas less developers, developed countries will have their sights on the agri and regional payments because that's a more important part of their economic model.
- [19:42]
Sarah Wheaton
And so ultimately every capital has a veto and the European Parliament needs to ultimately approve this. And so this is going to be a huge fight going forward. Baritosh I just want to end with you put a little bit more of a, like, on the ground, human face on this. We actually got a question from a listener and she said that her dad is a farmer in Poland and owns nearly a thousand hectares of land. Would he lose out under this proposal?
- [20:10]
Bartosz Brzezinski
That is a big farm in Poland for sure. So the commission is trying to set aside more of that money towards small farmers, young farmers, women in farming, and it's putting limits on how much big farmers will receive. That being said, they have tried this in the past and it always fails because this is very hard to sell to member states, member countries where some have mostly big farmers and some have a lot of small farmers. So let's see. I don't know if this will work, but from what I've heard, it's one of the first things that could go in the negotiations.
- [20:45]
Sarah Wheaton
Okay, so basically the answer is if this actually passed as is, then probably maybe this listener's father would lose some money. But he probably doesn't have to worry.
- [20:55]
Bartosz Brzezinski
About that, not at least for the next two, three years.
- [20:58]
Sarah Wheaton
Okay.
- [20:58]
Camille Gies
All right.
- [20:59]
Sarah Wheaton
Bartos, Gregorio, thank you so much for joining us here.
- [21:02]
Gregorio Sorghi
Thanks, thanks. Thanks, Aaron.
- [21:07]
Sarah Wheaton
If you want some deeper explanations, check out our show notes for links to Gregorio and Bartos reporting over the past few days. And with that, we need to take a quick break. When we come back, we'll move on to Trump's tariffs and whether Brussels has chosen the right strategy and the right people to handle talks with the White House. Stay with us. When did making plans get this complicated?
- [21:42]
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Gregorio Sorghi
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Sarah Wheaton
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- [22:33]
Camille Gies
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- [22:38]
Sarah Wheaton
Last week, Trump just casually dropped on social media that he is ready to impose 30% tariffs on EU goods headed to the US to say Brussels was caught off guard would be an understatement. In recent weeks, European officials have been flying back and forth holding what they thought were productive talks with Trump's team, negotiations they believed were on the verge of success. And then, as he tends to do, Trump blew it all up. So now what? Here's an edited version of a conversation our Politico Pro subscribers heard earlier this week. It's titled to hold, to Fold or Go All Europe and Trump's 30% tariff threat. You'll hear our trade and agriculture editor, Doug Busvine talking with reporters following trade on both sides of the Atlantic. Camille Gies in Brussels and Ari Hawkins in Washington.
- [23:36]
Doug Busvine
Donald Trump triggered speculation that he was about to send one of his letters to the eu. And at the time he said a letter means a deal. But the letter that actually landed on Saturday didn't look much like a deal to me. At least. What did it say? Arim Right.
- [23:51]
Narrator/Advertiser
The letter that the Trump administration sent to the president of the European Commission was, if anything, kind of the opposite of the deal. It threatened a 30% tariff on EU that would now actually go into effect August 1st. So hidden within that sort of tariff increase threat, there's actually a delay of when the US Is planning on imposing tariffs on the EU as well as the vast majority of its trading partners here. And so it was a bit of a shock on all ends. It came without appearing to have a bit of a heads up on that. And it is an escalation. It was 10% higher than the rate that the bloc was slapped with back in April during what Trump dubbed Liberation Day. So we do see a bit of an escalation and of course that will inevitably trigger a response.
- [24:42]
Doug Busvine
And what impact did the letter have on European leaders, Camille? Were they shocked?
- [24:46]
Camille Gies
Yeah, absolutely. I think there was a lot of surprise across the European Union. People I was talking to were even referring to it as violent because we were so close of at least it was the perception of the European Commission. It was briefing along the lines of a deal is coming any it's coming with a matter of days. And yet this letter still came. They were also working on the understanding that the European Union wouldn't get a letter because of the ongoing negotiations. And yet it happened. The Danish presidency of the Council of the EU called Cour, so called courrepere. So a meeting of the ambassadors on Sunday evening to sort of align on what course to take, Right. To kind of, you know, have a bit of a sense of what's our reaction, if any, and how are we going to put this forward?
- [25:31]
Doug Busvine
So it was panic stations in Brussels, quick statement on Saturday saying we can retaliate. Right. And then on Sunday, Ursula von der Leyen, the head of the European Commission, came out and said, well, actually, no, we're going to postpone some retaliation. And then now we're hearing there's going to be more retaliation, but later. So now that they've had a chance to talk, the ministers, the Commission, all 27 countries in the EU, what's the playbook that has come out? What have they agreed on?
- [25:59]
Camille Gies
Yeah, so it's true that there was initially a bit of an attempt at kind of calming things down, but it was very clear that, you know, the appetite to retaliate is growing, is coming back up on the table, because this was seen and lived, such as a slap in the face, in a way. Right. And so I think we are witnessing, especially since the letter, a bit of a change of narrative on that front. There are a few camps and some divisions across EU countries on what should be the playbook, depending on national interests. Right. You can sort of group two camps broadly, depending on the appetite to retaliate from one side. You have France, obviously, who's pushing for retaliation to some extent. If the interests of the European Union are not respected in that camp, I think to some extent, you can group Portugal, Luxembourg, Spain. I did feel that Austria was a bit on the fence, was a bit more in the camp that Germany is leading, you know, very open economies. Who wouldn't want to be caught in a trade war? You also have Italy and Germany and Hungary, who are a bit more cautious, as well as the Baltics, who are worried about some of the aspects related to security and the war in Ukraine.
- [27:11]
Doug Busvine
Obviously, it's a bit of a case of herding cats with a bloc made up of 27 countries dealing with one big man in the White House. Could you just talk us through the retaliation playbook? Most importantly, tell us about the timing, because this is not in force yet. Right. It's all going to come later.
- [27:29]
Camille Gies
Yeah, exactly. So if we rewind a bit, there were tariffs on steel and aluminium that Trump imposed on the European Union, going to 25%. The European Union, in response, came up with the first package of retaliation, which is worth 21 billion of US exports. So this is the package that was decided to be put in the freezer initially. It was until July 14, and now it's until August 6. So this is for the first line of retaliation. This package is including soybeans, ice cream, and so on. The second round of retaliation comes in response to Trump's universal and car tariffs. So what he imposed as part of Liberation Day. This list was initially aimed at targeting 95 billion of US experts. It's been a bit watered down. And this is what the Commission proposed to member states. There has been this informal formal consultation between member states to try and make sure that the list would basically not hurt ourselves more than it would hurt the United States. Right. And so out of these 95 billion, we came up to 72. And so this list doesn't include the tariff rate. The commission has floated in the past that it could be as high as 25%. But I think it's keeping, you know, its strategic ambiguity on, on this and perhaps just to give you a quick rundown of, you know, the big buck buckets of good that is going to be targeted. The bulk of it is the industrial goods, aircraft, automotive, medical devices, chemicals, and so on. And then, you know, as a second kind of bucket, you have also the agricultural products. And so in that category, which could be quite painful, you have bourbon whiskey, which was a hotly contested sector, especially from France and Ireland. And then I think wine is in there as well. I've seen also motorbikes, motorcycle parts, so, you know, the tires and so on.
- [29:27]
Doug Busvine
All right, let's go to Ari. The EU seems to think it pretty much had cut a deal with Trump's trade team. Was that a reasonable expectation? Have they misread Trump entirely?
- [29:39]
Narrator/Advertiser
I think it's a really good question to ask, how to really get inside Trump's head to know those types of exact dynamics. But from all signs from within the White House, they've been projecting confidence on the US Side, too, that a deal was within reach. Granted, they had done that with a number of trading partners, but there was no expectation that there was going to be some kind of major hindrance. Both sides were projecting confidence about that Aug. 1 deadline. One thing, though, to keep in mind is that the individuals that are involved most closely with trade negotiations in the US and the Trump administration aren't necessarily the ones that have the direct ear of the president, meaning Jameson Greer, the US Trade representative, has been on the forefront of dealing with the European Union in trade talks. However, Treasury Secretary Scott Besant is actually the one that has the closest ear to the president when it comes to the vast majority of these trade negotiations. Meaning it is definitely possible that talks were, in fact, going well, and then that doesn't necessarily translate to that final deal being crossed here. I think another point that's important to note here is that it's not necessarily mutually exclusive. Talks could be going well, and there could be a loose framework for a deal coming ahead of that August deadline. And at the same time, the President might still, Trump might still want to eke out these sort of final concessions. And I think that's partly why these letters are being sent, to try to sort of put that extra leverage on these trading partners, really, as we get down to the wire for that deadline.
- [31:15]
Doug Busvine
This is just incredible pressure tactics by Trump. This is the art of the deal in action. Right? I mean, coming back to you, Camille, you know, the. The EU negotiating team is obviously operating under tremendous pressure. There's this deadline. The clock is now ticking on Trump's escalation, but also now effectively on the EU's retaliation. Is it, under these circumstances, even possible to negotiate a solid deal? I mean, we still seem to be talking about something pretty preliminary, pretty basic here. Can this be done in the time available?
- [31:48]
Camille Gies
The pressure is on whether they are going to be able to even seal some sort of very light trade agreement. Seems a bit of a. I've heard many people saying it was going to be impossible. We were never going to get it. It does feel like, you know, the political stakes and the political capital that is put into these negotiations mean that it's not possible to fail. Like, it would be too huge of a blow for both the European Union and Washington in a way.
- [32:13]
Doug Busvine
I'd like to pull back the focus sitting in Washington. Ari, you are dealing with multiple trade negotiations or trade standoffs going on at the same time. How should we think about, you know, Trump's tactics towards Europe in the bigger picture? I mean, he's escalating on multiple fronts.
- [32:30]
Narrator/Advertiser
That's right. The European Union is very much not alone. There have been more than two dozen trading partners now that have received a similar letter from what's been reported. None of them really got a heads up. And it was a pretty big shock, particularly to allies. We saw most recently, Canada received a letter warning of a 35% tariff rate. Mexico also received a letter at a 30% tariff rate. And then Brazil. Brazil also received a letter at 50%. So a lot of that does putting the European Union sort of in that dynamic. The Trump administration has made it pretty clear that there are some longstanding, I guess, disagreements that the US has with the EU broadly. And we are seeing that play out in these negotiations in that the EU is facing higher tariffs than some other partners. The President many times has indicated that he believes that the EU would, was formed to, quote, screw the US and that's a pretty similar line from other members of the administration as well. So the EU is in a bit of a difficult scenario. The one thing that really does give them a leg up is that collectively there are quite more of a powerful economy compared to, for instance, Canada on its own. A lot of these countries are in a very awkward situation where they can't fully retaliate. But the eu, as I said, is in a different situation. They're collectively a much more powerful economy that, that is able, if they wanted to take a much more firmer line than some of these smaller countries.
- [33:59]
Doug Busvine
What I'm seeing is some great questions coming in on the chat. This would be one for you, Camille. Is the Commission failing to understand that they should send VDL European Commission President Ursula von der Leyen rather than emissaries to negotiate with Trump?
- [34:13]
Sarah Wheaton
Yeah.
- [34:13]
Doug Busvine
Why is Ursula von der Leyen leaning on her Mr. Fix It Trade Commissioner Marosiewicz and not getting stuck in herself at the highest level.
- [34:22]
Camille Gies
It all starts from a trust standpoint. The way the commission is at least perceiving it is that, you know, Trump appointed Jamison, Greer, Howard Luknik to kind of, you know, do these negotiations. So the European Commission is doing the same as we know. Shepkovic is a very experienced commissioner. He has a lot of political clout in the EU bubble. Even on deep, deep background. I haven't heard many people criticizing him. It feels that he has the right, right balance between a bit of political capital, between this kind of smooth operator vibe, while at the same time he has an army of very experienced trade negotiator. I've heard people say that maybe we should have put in a more political team, just like the UK did. Yeah. I'm not sure the European Commission is indeed having this kind of both political and technical task force advancing forward, but it does feel to me that it is operating with the means it has for now.
- [35:18]
Doug Busvine
Even if there is a deal in the end, how would the EU make sure that this is the final deal, considering that Trump can come up with new measures? That's the huge question I think we're all asking. I mean, do we know whether a deal with Trump is really a deal that will stick or will he just turn around and rip it up?
- [35:34]
Narrator/Advertiser
Irene, it definitely depends on your definition of rip it up. So taking a look at some of the countries or groups that have secured some kind of agreement prior. So the existing USMCA deal between the U.S. mexico and Canada, we're seeing some benefit that they're receiving in that these tariffs are only being applied to the portion to about 60% of trade within the country. That's a tangible benefit while at the same time still being a much higher tariff rate than prior to Trump's second administration. So there is a tangible benefit from getting something signed. Even with the US And China, there was a temporarily scaling back on both sides from triple digit tariffs in a way that effectively means that the US And China are able to trade again. So that means that there is a tangible benefit that these trading partners receive when they have something on paper. At the same time, it's clear that the Trump administration is willing to make changes after the fact. They're still discussing aspects of the US United Kingdom deal.
- [36:37]
Camille Gies
So yes and no, the question is spot on. And it's also an argument that some of the EU countries who are a bit more hawkish are also putting forward, like if we don't retaliate now, when are we going to show teeth and show Trump that he just cannot walk back all the time on whatever he says? So this is exactly, you know, a fine line between what you are ready to agree upon.
- [37:01]
Sarah Wheaton
And that's it from us this week. Break we're taking a short break, but we'll be back on the 1st of August with our special summer reading episode. If you haven't already, follow EU Confidential wherever you get your podcasts and leave us a rating and a review. You can also drop us a line@podcastolitico.eu thanks as always to Deanna Sturris, our senior audio producer, and to Ann McElvoy, POLITICO's head of audio. Thanks as well to the Politico Live and product teams for their work on the Pro Trade briefing. I'm Sarah Wheaton. See you in two weeks.
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Narrator/Advertiser
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Sarah Wheaton
Cut the camera. They see us.
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