WSJ What’s News: Europe Gears Up for U.S. Trade Fight – July 21, 2025

Hosted by Azhar Sucri for The Wall Street Journal

Introduction

In the July 21, 2025 episode of WSJ What’s News, host Azhar Sucri delves into escalating trade tensions between the European Union (EU) and the United States (US). The discussion highlights the EU's preparations for a potential trade confrontation, internal dynamics within the EU, the impact of Japan's political landscape on US trade negotiations, and domestic US economic strategies. Additionally, the episode examines the UK's recent attempts to tax the super-rich and reviews significant corporate earnings reports.

EU vs. US Trade Tensions

Escalating Trade Disputes

Azhar Sucri opens the episode by addressing the EU's mounting efforts to counteract US tariffs. Initially, the EU was optimistic about securing a trade agreement that would maintain baseline tariffs at 10%, preserving one of the world's largest trading relationships. However, US President Donald Trump's insistence on further concessions has derailed these negotiations.

Commerce Secretary's Stance

In an exclusive report, Sucri cites US Commerce Secretary Howard Lutnick's reaffirmation of the August 1 deadline for the EU to reach a trade deal. Lutnick emphasizes the importance of resolving the dispute, stating:

“These are the two biggest trading partners in the world talking to each other. We'll get a deal done. I am confident we'll get a deal done, okay? And it will be great for America because the president has the back of America.”
— Howard Lutnick [01:50]

EU's Internal Dynamics and Response

Sucri is joined by Dan Michaels, the WSJ Brussels bureau chief, who provides insight into the EU's internal debates. Michaels explains that the EU has historically been divided between hawkish members led by France and more conciliatory voices spearheaded by Germany. Recently, German representatives have shifted towards a tougher stance, aligning more closely with France's approach due to growing frustration with the US.

“The Germans now are more willing to discuss a more muscular response to US Tariffs, you know, if they come in in a way that the EU finds really unfavorable.”
— Dan Michaels [02:24]

Background on US-EU Trade Relations

Michaels further elaborates on the deteriorating trade relationship, highlighting President Trump's longstanding criticism of the EU and his focus on trade imbalances. He notes:

“President Trump, since his first term, has been very critical of the EU. He has said a few times things like that the EU was created to screw the US and then the Europeans take advantage of the US on trade.”
— Dan Michaels [03:23]

Michaels points out that while the EU maintains a trade surplus in goods, the US counterbalances this with a services surplus. Despite the EU's attempts to bridge the gap by increasing purchases of US fuel, energy, agricultural products, and defense systems, inconsistent messaging from various US officials has strained negotiations.

Potential EU Retaliation in Services

The conversation shifts to the EU's novel approach to retaliate by targeting the US services sector—a move unprecedented in significant measures. Michaels explains the complexities of imposing tariffs on intangible services compared to tangible goods:

“It's really a new realm, partly because the service economy is relatively new compared to the trade in goods... how one puts a tariff on either digital data or financial services is something people are still scratching their heads about.”
— Dan Michaels [04:59]

This strategy underscores the EU's intent to level the playing field, as services constitute a more substantial portion of the US economy compared to goods.

Impact of Japan's Political Landscape on US Trade Talks

Sucri transitions to discuss the recent parliamentary elections in Japan, which have significant implications for US trade negotiations. Prime Minister Shigeru Ishiba's coalition has suffered setbacks, losing control of both the lower and upper houses of Parliament. Ishiba's hardline stance on trade with President Trump aimed to solidify his leadership but has instead weakened his position.

Treasury Secretary's Intervention

Amidst these political upheavals, Treasury Secretary Scott Besant is actively engaging President Trump to prevent the dismissal of Federal Reserve Chair Jerome Powell. Besant argues that removing Powell could destabilize the US economy, especially as the economy has shown resilience despite the ongoing trade war.

“It's really not worth his while to try to fire Jerome Powell, partly because, look, the economy’s holding up okay.”
— Scott Besant [07:01]

Besant warns that disrupting the coordination between the Treasury and the Federal Reserve could exacerbate inflationary pressures, hindering economic stability.

UK’s Taxation of the Super-Rich: Consequences and Challenges

Transitioning to global tax policies, Sucri explores the UK's recent initiative to tax the super-wealthy. In an effort to balance its budget, the UK abolished the "non-domiciled" status in April, which previously allowed foreigners living in the UK to be taxed only on their domestic earnings.

Exodus of the Wealthy

Journal markets reporter Chelsea Dulaney highlights the unintended repercussions of this policy change:

“The UK is having a lot of problems right now balancing its budget. They took the plunge, they eliminated the system... now too many of them have left or are planning to leave that it's actually going to end up costing the government money.”
— Chelsea Dulaney [10:22]

The expectation was to generate approximately $45 billion by 2030 through this tax reform. However, the rapid departure of wealthy individuals has cast doubt on the policy's effectiveness and raised concerns about potential financial losses for the government.

Global Implications of Taxing the Wealthy

Dulaney also connects this scenario to a broader trend, noting similar attempts worldwide to address income inequality and fund social initiatives by taxing the ultra-wealthy. She references New York's consideration of a "millionaires tax," emphasizing the recurring challenge governments face in implementing such measures without triggering capital flight.

“The fear of that has always been that they'll leave and they'll take their businesses and that money with them.”
— Chelsea Dulaney [10:54]

Corporate Earnings and Market Implications

In the latter segment, Sucri reviews key corporate earnings that have significant market implications:

1. Stellantis: The automaker reported a net loss of approximately $350 million in the first half of the year, attributing the decline to US tariffs. Vehicle shipments in North America plummeted by 25%, particularly affecting the Jeep brand.

2. Ryanair: Contrary to Stellantis, Ryanair experienced a robust first-quarter net profit, more than doubling its earnings. This success is attributed to an early Easter holiday and a 21% increase in fares, along with higher passenger numbers. However, challenges persist with delayed Boeing aircraft deliveries, which may suppress second-quarter fare growth.

3. Alaska Airlines: The airline faced operational disruptions due to a significant software outage, leading to a temporary grounding of its fleet. Recovery is underway, but full restoration of services will take additional time.

4. Microsoft: The tech giant issued a security alert regarding active cyberattacks targeting its SharePoint server software. Microsoft urges customers to install new security updates and recommends disconnecting servers from the Internet if immediate protection is not feasible.

Conclusion

The episode underscores the intricate web of international trade relations, domestic economic strategies, and fiscal policies shaping the global economic landscape. As the EU prepares for a potential trade confrontation with the US, internal shifts within the EU and external political developments, such as Japan's election outcomes, play pivotal roles. Simultaneously, the UK's ambitious taxation reforms reveal the delicate balance governments must maintain to fund social priorities without triggering capital flight. Corporate earnings further illustrate the tangible impacts of these macroeconomic factors on businesses across various sectors.

Produced by Daniel Bark and Kate Bullivant, with supervising producer Sandra Kilhoff. For more insights, tune in to the next episode of WSJ What’s News.