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EU-US trade talks stall as Brussels resists Trump’s 25% auto tariff threat

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Negotiations between the European Union and the United States over a contentious bilateral trade agreement ended late Wednesday without a final settlement, as the European Parliament continues to withhold formal ratification amid escalating tensions over US tariff threats and geopolitical instability.

The European Parliament (EP) has yet to grant official approval to the pact. A significant bloc of lawmakers is now demanding the insertion of stringent safeguard clauses, citing the US administration’s unilateral decision to increase certain tariffs in violation of the agreement’s spirit. Concerns have been further exacerbated by threats regarding the annexation of Greenland, which MEPs argue have called the foundations of transatlantic cooperation into question.

US President Donald Trump has issued a high-stakes ultimatum, threatening to raise tariffs on European automotive imports from 15% to 25% if the trade agreement is not implemented immediately.

Internal accounts suggest the framework of the deal was effectively dictated by the United States last summer without substantive negotiations, despite fierce opposition from France. The drive to finalize the pact has been largely spearheaded by the German government under Chancellor Friedrich Merz, whose administration is seeking to protect a domestic automotive industry currently grappling with a severe structural crisis.

The latest round of “trilogue” negotiations—involving the European Parliament, member state governments, and the European Commission—concluded in the early hours of Thursday morning without a breakthrough. While reports from the meeting indicate that the parties narrowed their differences on several technical points, the European Parliament remains firm on its demand for protectionist safeguards, despite intense pressure from Berlin.

Negotiations are scheduled to resume on May 19.

Strategic dependency and the “New Realpolitik”

A report prepared by Sabine Weyand, then the European Commission’s Director-General for Trade, provides a detailed account of the events leading to the preliminary customs agreement reached on July 27, 2025, between Commission President Ursula von der Leyen and President Trump.

Weyand, a veteran negotiator known for her rigorous approach, noted in late August 2025 that the process lacked the hallmarks of a traditional negotiation. “There was no exchange of demands or offers,” Weyand stated, emphasizing that the European side operated under extreme duress.

The report highlights that the EU’s total security dependence on the US, driven by the ongoing war in Ukraine, left Brussels with little leverage. Weyand argued that failing to concede to the Trump administration’s demands—or attempting to implement counter-measures—carried the unacceptable risk of Washington “calling the security partnership into question.”

According to Weyand, the Commission made a strategic calculation to “secure a general political package.” Following the signing of the agreement at President Trump’s Turnberry golf resort in Scotland, Weyand reportedly characterized the lopsided arrangement as “simply the Realpolitik of a new era.”

Alignment against the WTO

The agreement has drawn sharp criticism from economic experts who argue that Brussels has aligned itself with Washington’s efforts to bypass international trade norms. Gabriel Felbermayr, a member of the German Council of Economic Experts, noted that the deal constitutes a clear violation of World Trade Organization (WTO) law.

Under the WTO framework, the US had committed to a 2.5% general tariff on automobile imports. By agreeing to a bilateral deal that circumvents these multilateral obligations, Felbermayr argues the EU has become an “accomplice in an attack on the WTO.”

Furthermore, this alignment appears to have yielded few tangible benefits for the EU. Since the initial signing, the US has progressively expanded steel and aluminum tariffs to cover additional product categories. Felbermayr warned that if the EU fulfills its obligation to reduce industrial tariffs to zero while the US fails to reciprocate, Brussels risks being left in a position of extreme disadvantage.

Dominance of German automotive interests

Ursula von der Leyen’s initial endorsement of the tariff agreement last summer sparked significant internal friction within the bloc. France led the opposition, with Prime Minister François Bayrou denouncing the deal as a “capitulation” to Washington.

French Foreign Trade Minister Laurent Saint-Martin has insisted that “the final word has not yet been spoken,” warning that the EU’s status as a global economic power is at stake. However, these protests were largely sidelined by the German government’s support for von der Leyen.

While the deal is viewed as potentially harmful to other sectors—such as the chemical industry, which faces competition from duty-free US imports—the German automotive sector has lobbied aggressively for its adoption. The US remains the most critical export market for German carmakers.

Industry sources argue that a rapid reduction of US tariffs from 25% back to 15% is an existential priority. Additionally, the sector has a vested interest in avoiding retaliatory tariffs, as German manufacturers frequently import vehicles into the EU from their own production facilities located within the US.

Parliamentary resistance in Brussels

Despite the industrial pressure, the European Parliament has emerged as a major hurdle. Ratification votes have been suspended twice on short notice: first in January following the Greenland annexation threats, and again in February after a US Supreme Court ruling found a majority of the Trump administration’s tariffs to be unlawful.

On March 26, the Parliament finally granted conditional approval, but with strict stipulations. MEPs are demanding that EU tariff waivers on US goods only take effect once Washington has fully complied with all provisions of the agreement.

To date, Washington has continued to raise tariffs on goods with even minimal steel and aluminum content, despite such moves being outside the scope of the pact.

The European Parliament is also seeking a mechanism to suspend the agreement if the US government employs economic pressure to extract political concessions, or if specific US imports flood European markets. Under the Parliament’s proposal, the extensive duty-free access granted to the US would be subject to a formal review by March 31, 2028, with the possibility of immediate revocation if it is found to cause disproportionate harm to EU industries.

Industry pressure on the Chancellery

In the wake of Trump’s latest threat to hike auto tariffs to 25%, the German automotive lobby has intensified its pressure on Brussels. Chancellor Merz has echoed these calls, urging the EU to implement the agreement as demanded by Washington without further delay or conditionality.

Hildegard Müller, President of the German Association of the Automotive Industry (VDA), has demanded the unconditional fulfillment of the July 2025 pact, stating that the EU must “finally implement its part of the agreement.”

Chancellor Merz has criticized the European Parliament’s stance, accusing the European side of “constantly introducing new conditions.” According to the Chancellor, “the Americans are ready; the Europeans are not,” as he continues to push for a resolution at the earliest possible date.

Europe

Fico accuses Merz of blackmail over threat to veto EU budget

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Slovak Prime Minister Robert Fico has hit back after German Chancellor Friedrich Merz threatened to veto the EU budget unless funding for Ukraine is secured.

Merz said he would block the EU’s seven-year budget if no agreement is reached on financial assistance for Ukraine.

The chancellor’s intervention has angered Central European leaders who are net beneficiaries of EU funds but do not want to take part in the next round of funding to support Ukraine’s war effort.

“What the chancellor is doing is typical blackmail, and I will not bow to it,” Fico told reporters in Bratislava.

Fico spoke alongside his Czech counterpart, Andrej Babiš, whose government has refused to participate in a future loan to Ukraine.

“I do not know why he said this,” Babiš said, referring to Merz’s stance.

Merz wants EU leaders to discuss Ukraine’s financing needs at a summit in Dublin on Friday.

In a letter to European Council President António Costa, who will chair the meeting, obtained by The Guardian, Merz wrote:

“We must maintain our support for Ukraine in its struggle to defend itself. This is our shared vital interest. Yet bilateral aid provided to Ukraine is distributed unevenly, with the burden shouldered mostly by only a few member states.”

The EU agreed last year to provide a €90 billion loan to Ukraine, intended to cover two-thirds of its military and civilian spending for 2026 and 2027.

Since then, however, Russia’s relentless bombardment has placed a heavier financial burden on Kyiv, prompting President Volodymyr Zelenskyy to ask for €70 billion to plug the budget deficit.

The EU has endorsed Zelenskyy’s figures and pledged to find €45 billion. Ukraine’s other allies, such as Britain and Canada, are expected to cover the rest.

Last year, Merz launched an initiative to tap €210 billion in frozen Russian state assets held in the EU, but the plan fell through due to opposition led by Belgium, which holds most of the funds in Brussels.

The €90 billion loan was the backup plan. Having opted out of that loan, Hungary, Slovakia, and Czechia indicated that they would not take part in the next round either.

Bulgaria joined these three member states following the election of Prime Minister Rumen Radev last April.

The question of funding for Ukraine is now spilling over into the fraught negotiations on the 2028-34 EU budget.

Germany, the largest net contributor, wants substantial cuts to the proposed budget and opposes the EU providing generous funding to member states that refuse to contribute to Ukraine’s financial needs.

Merz states in his letter that a “collective commitment without exceptions” is a “fundamental prerequisite” for closing Ukraine’s financing gap and for “discussing other matters, particularly those with financial implications.”

He also notes that, in the context of the EU’s next seven-year budget, known as the Multiannual Financial Framework, all member states must contribute to a “robust” financial perspective for Ukraine from 2028 onwards.

A German government official said:

“For the Multiannual Financial Framework (MFF) to be successfully concluded, it is vital that all EU member states provide financial support to Ukraine.”

Berlin is also aiming to shift decision-making on funding for Ukraine from unanimity to qualified majority voting, in an effort to prevent a single government from blocking EU decisions.

The letter reflects mounting frustration among the EU’s northern member states, Ukraine’s most generous backers, over lower contributions from other EU countries in Central and Southern Europe.

The task of brokering an agreement on the budget falls to Costa, the former Portuguese prime minister.

Costa wants a deal by the end of the year, ahead of elections in France, Poland, and Italy in 2027 that could complicate the process.

A spokesperson for Costa confirmed receipt of the letter without elaborating on details. “President Costa will dedicate time to the Ukraine issue at the informal European Council meeting in Dublin this week,” the spokesperson said, adding that funding for Ukraine would be addressed at a dedicated summit on the EU budget scheduled for 26-27 November.

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EU expects next Israeli government to adopt less aggressive posture

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The EU expects the next Israeli government to mend its “difficult relationship” with Brussels and adopt a more constructive approach toward Gaza and illegal settlements.

Israeli President Isaac Herzog tasked Gadi Eisenkot, the leader of the anti-Netanyahu bloc, on Sunday with forming a government.

Eisenkot stated that the country faces a “catastrophic diplomatic crisis” as traditional allies begin to reassess their relations with Israel.

Speaking to Rapporteur, several European diplomats stationed in Tel Aviv said they expect ties to get back on track.

“Whatever government comes in, we can try to revitalize relations because Israel is clearly a very important partner,” one European diplomat said, adding that Brussels expects the next administration to be “less aggressive”.

The diplomat noted that relations with Europe are currently “not very good”.

Israel cut off communication with Kaja Kallas, the EU high representative for foreign affairs and security policy, after Rapporteur revealed in June that she had compared Israel to apartheid-era South Africa during a visit to Mexico.

The diplomat stated that this decision, taken ahead of elections, was political in nature. A second European diplomat based in Brussels explained that the announcement came only a few days before an official visit by Dubravka Šuica, the European commissioner for the Mediterranean.

“This could have been interpreted as a tactic to divide Europe, but Israel had asked Kallas to deny the report; she did not do so,” the second diplomat said.

Brussels has repeatedly voiced its frustration with Israel over the humanitarian crisis in Gaza and the expansion of West Bank settlements.

However, EU governments blocked almost all sanctions proposed by the European Commission.

A third diplomat said opposition parties would “almost certainly take the issue more seriously” when it comes to tackling violence by West Bank settlers:

“We see Palestinians being expelled from their homes and new illegal settlements being built in the West Bank. There is a reluctance on the part of the current government to address this issue, which causes problems in our relations.”

The new government is expected to ease pressure on Palestinians and halt construction of the E1 settlement project, a controversial plan to build settler housing in the West Bank east of Jerusalem.

“They will probably try to deal with the problem of extremist settlers in the West Bank,” the diplomat added.

On Gaza, the diplomat described the situation as “a complete nightmare”, with two million Palestinians crowded into an area that accounts for roughly 35% of the territory.

“There are not enough tents for the winter, and not enough vaccines are reaching the area despite an increase in diseases,” the diplomat said.

The European official argued that Donald Trump’s peace plan met all the conditions for Europe. Although the EU had much to offer, neither the US nor Israel appeared interested in EU involvement in the process.

“We are currently training Palestinian police in the West Bank, and if permitted, we could do the same in Gaza,” the diplomat said.

The diplomat disclosed that Israel had agreed with Šuica that Europe would finance two projects aimed at improving sewage and water infrastructure in Gaza, continuing:

“However, none of these projects has started yet because there is a serious problem with dual-use goods. Getting materials into Gaza is very difficult because the Israelis say they could be misused if they fall into the wrong hands of Hamas.”

Israel insists that Hamas must be disarmed before subsequent phases of Trump’s plan can proceed.

With disarmament unlikely to happen in the near term, the EU argues that certain measures can be carried out in parallel.

“We can begin rebuilding sanitation systems in Gaza. We can start building desalination plants. We can begin providing energy and water to Gaza,” one diplomat said.

While Brussels hopes for progress on Gaza and the West Bank, it maintains that expectations regarding the establishment of a Palestinian state need to be “managed”.

The EU continues to advocate a two-state solution, yet most leading Jewish parties oppose the creation of a Palestinian state.

The diplomat noted that the next Israeli government will likely have “a very slim majority and not much room for manoeuvre”.

There is also a “major misunderstanding” between the EU and Israel that must be addressed. According to the diplomat, Europeans fail to recognize the “psychological impact” of 7 October on Israelis.

“This event changed the country and made the two-state solution even more distant than before,” the diplomat said.

In return, some Israeli politicians believe Europe has betrayed Israel despite what they view as a fight against “Islamist terrorism”.

“Their argument is that European politicians are somewhat afraid of the Muslim population in Europe,” the European diplomat said.

Europe strongly opposes Iran and the possibility of Tehran acquiring nuclear weapons, imposing sanctions in response.

However, the diplomat argued that the EU would not participate in a war because it lacks a common army:

“We are a diplomatic and economic power, which is why we resort to sanctions and diplomacy. The expectation that we would take part in a military operation is unrealistic.”

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Germany threatens EU budget veto over long-term Ukraine aid

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Germany has threatened to veto the European Union’s joint budget for the 2028-2034 period, which is currently under negotiation, unless every member state commits to providing financial support to Ukraine in 2027 and subsequent years, German Chancellor Friedrich Merz warned.

According to a report by the Financial Times (FT), Chancellor Merz set out Berlin’s condition for the budget talks in a letter addressed to European Council President António Costa.

In his letter, Merz wrote: “A collective commitment that every single one of us, without exception, will make a fair contribution to closing Ukraine’s budget deficit is an indispensable prerequisite for resolving this budget issue and, in particular, for addressing subsequent matters that carry financial implications.”

The German Chancellor stressed that a formula backed by all member states must be established to provide Ukraine with a reliable, multi-year financial perspective starting from 2028.

Merz also insisted that any agreed solution must cover the interest payments on debts incurred to finance the assistance provided to Kyiv.

Conversely, several countries within the bloc have cut financial aid to Ukraine, and the number of capitals adopting this stance is projected to rise next year.

In December 2025, Hungary, Slovakia, and the Czech Republic approved the EU’s 90 billion euro loan package for Kyiv only on the condition that they would not contribute to its costs themselves.

Alongside these three countries, Bulgaria has also stated that it does not plan to participate in subsequent financial assistance packages for Ukraine.

In France, far-right leader Marine Le Pen, who could potentially win the presidential election scheduled for spring 2027, recently told the FT that Paris has run out of funds.

Le Pen assessed: “The honest approach is to tell Mr Zelensky clearly, and even warn him: ‘Look, we cannot do more. We have already allocated the 90 billion euro EU loan, in which France’s share amounts to 18 billion euros. 18 billion euros is genuinely a huge amount of money.'”

The EU’s 90 billion euro loan, covering the 2026-2027 period, aims to meet two-thirds of Ukraine’s financing requirements.

Brussels expects the remaining 45 billion euros to be covered by other partners, including Canada, the UK, Norway, Japan, South Korea, and Australia.

Germany remains the largest net contributor to the EU budget.

In contrast, the four Eastern European countries seeking to avoid financing Ukraine rank among the largest net beneficiaries of the bloc’s budget.

Leveraging this balance, Chancellor Merz aims to use his influence in the EU budget negotiations to secure uninterrupted support for Kyiv in 2027 and the years beyond.

According to the FT, Berlin is also demanding that future aid packages be decided by qualified majority voting rather than unanimity, which is required under the current system.

A German government spokesperson told the newspaper:

“The issue of Ukraine’s financial needs must be resolved within the framework of the next EU budget. Financial support for Ukraine from all EU members is decisive for the successful conclusion of the budget talks.”

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