EU’s Von Der Leyen Calls Trump’s Tariff Extension a ‘Good Call’ — But Analysts Label It ‘Unnecessary Step’ In Talks

The European Union (EU) received a reprieve on the tariff front as President Donald Trump confirmed on Sunday that he has extended the pause on the 50% reciprocal tariffs applicable to the region to July 9 from the current timeline of June 1.

Trump clarified that the extension came in response to a request from European Commission (EC) President Ursula von der Leyen. “It was my privilege to do so,” he added.

This starkly contrasted with the belligerent tone the president sounded out last week. He recommended a 50% tariff on the EU, alleging the trade negotiations had stalled.

Responding to Trump’s latest offer, Von der Leyen said in a post on X that “Good call with @POTUS….Europe is ready to advance talks swiftly and decisively.” 

The EC president said the region would need time until July 9 to thrash out a deal.

The development set off a risk-on mood in the markets. The Euro STOXX 50 Index, which comprises the biggest 50 stocks from the euro area, rallied 1.30% on Monday.

Economists and analysts held a more muted view about the pause. Berenberg Chief Economist Holger Schmieding reportedly told CNBC. The six-week window probably won’t be enough time to settle all detailed questions, but it should be sufficient to “put the framework of a trade agreement in place,” just like the deal between the U.S. and the UK.

″[It] is basically a matter of political will, and that depends a bit on the U.S. side,” he said.

“If they do have the political will, we should really be able to have such an agreement with, probably in the end, a 10% tariff from the U.S. on all EU imports, hardly any EU retaliation, and [scaling back] a few sector-specific things … with some of the details to be finalized after July 9.”

He warned that if the U.S. were to push for a 20%-30% blanket tariff on EU goods, the latter would have no choice but to retaliate with countermeasures.

In an interview with CNBC, Guntram Wolf, a senior fellow at Bruegel, expressed skepticism about the extension. He said “massive uncertainty” remained, adding that this uncertainty is bad for businesses and consumers.

“Frankly, it’s an unnecessary step in the negotiations,” he added.

Wolf also sees the EU retaliating if the U.S. finalizes massive tariffs, given the importance of its pharmaceutical exports and the services industry.

Naeem Aslam, Chief Investment Officer at London-based Zaye Capital Markets, said, “Looking ahead, the EU-US trade dance is a high-stakes tango, with July 9 as the next flashpoint.”

“The EU’s dangling phased tariff cuts and 'mutual respect' talks, but Trump’s America-first bravado could turn negotiations into a slugfest, rattling supply chains and fanning inflationary flames.”

He singled out tech and the industrial sectors as the ones that face the maximum risk.

The Invesco QQQ Trust (QQQ) ETF and the SPDR S&P 500 ETF (SPY) are down 0.3% and 0.9%, respectively, for the year, while the iShares Europe ETF (IEV) is up about 21%.

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