Trump delays EU tariffs — however extra volatility may very well be on the best way

Traders ought to “buckle up” for extra volatility because the potential for a commerce struggle has not fully dissipated regardless of U.S. President Donald Trump’s delay of rolling out 50% tariffs on the European Union, analysts warn.

Trump introduced on Sunday that he had agreed to push the rollout of the punitive import duties again to July 9, following a name with EU Fee President Ursula von der Leyen.

The president had initially referred to as for a 50% tariff on EU items to start on June 1. He accused the bloc in a social media publish of being “very troublesome to take care of,” and mentioned commerce negotiations with the EU have been “going nowhere.”

European shares rebounded Monday morning, transferring into optimistic territory, after beforehand sinking on Friday in response to Trump’s contemporary tariffs threats.

Von der Leyen mentioned in a publish on X over the weekend that the EU was “able to advance talks swiftly and decisively.”

“The EU and US share the world’s most consequential and shut commerce relationship,” she mentioned. “To achieve a very good deal, we would want the time till July 9.”

European Commerce Commissioner Maros Sefcovic mentioned in a publish on X later Monday that he had “good calls” with U.S. Commerce Secretary Howard Lutnick and that they might “proceed to remain in fixed contact.”

However whereas Trump’s announcement of the delay has granted the 2 events some extra respiratory area, market watchers warned Monday that quite a bit stays at stake.

Berenberg Chief Economist Holger Schmieding informed CNBC that the six-week window till tariffs kick in was in all probability not sufficient time to “settle all detailed questions” – however he argued it ought to be ample to place the framework of a commerce settlement in place.

“It ought to be sufficient to get an settlement just like the one between the U.S. and the U.Okay.,” he mentioned on CNBC’s “Europe Early Version” on Monday.

“[It] is principally a matter of political will, and that relies upon a bit on the U.S. aspect,” he added. “In the event that they do have the political will, we should always actually be capable to have such an settlement with, in all probability in the long run, a ten% tariff from the U.S. on all EU imports, hardly any EU retaliation, and [scaling back] a number of sector-specific issues … with among the particulars to be finalized after July 9.”

Nevertheless, Schmieding famous that if the top consequence have been a 20% or 30% blanket tariff on EU items, “the EU would haven’t any selection” however to impose “important countermeasures” in opposition to the US.

Labeling Trump “an attention-grabbing negotiator,” Schmieding argued that the president usually tries to shock these with whom he is negotiating into agreeing to concessions. However the EU, he mentioned, was unlikely to capitulate to those techniques.

“We simply have to remain calm, and from the European aspect, we simply have to barter – we have now to recollect from the European aspect that our market is massive, that we do matter in financial phrases to the U.S. rather a lot, not simply vice versa,” he added. “So these negotiations ought to be negotiations amongst equals. The European Union will not be a area which may be scared into simply dropping by the wayside.”

Guntram Wolff, senior fellow at Bruegel, informed CNBC that regardless of the extension of the tariffs deadline, “huge uncertainty” remained.

“This uncertainty is unhealthy for enterprise, it is unhealthy for shoppers, and albeit it is an pointless step within the negotiations,” he informed CNBC’s “Europe Early Version.”

“It’s totally unclear what precisely the U.S. President desires,” Wolff added. “That is the most important impediment at this stage, that within the negotiations the EU has made presents, has made proposals, however it would not actually know what the president desires.”

In response to Wolff, the EU is “enjoying it relatively properly.”

“The U.Okay. has given in on all types of calls for, China is the opposite excessive, [it] has actually escalated … to some extent the place the U.S. needed to blink, needed to give in,” he defined. “Europe form of tries to take a center path.”

The EU does have capability to retaliate ought to huge tariffs be levied on its exports by the Trump administration, Wolff added, pointing to the significance of its pharmaceutical merchandise to the U.S., and the potential for retaliatory measures to be carried out within the companies sector.  

“However the EU thus far has determined to not do it, actually to maintain a local weather of de-escalation,” he mentioned. “However on the finish of the day, which may not be sufficient now.”

Naeem Aslam, chief funding officer at London’s Zaye Capital Markets, informed CNBC on Monday the tariffs delay had sparked a “tentative risk-on rally” – however like Wolff, he cautioned that a lot remained at stake.

“Trying forward, the EU-US commerce dance is a high-stakes tango, with July 9 as the following flashpoint,” he mentioned in an electronic mail.

“The EU’s dangling phased tariff cuts and “mutual respect” talks, however Trump’s America-first bravado may flip negotiations right into a slugfest, rattling provide chains and fanning inflationary flames.”

Aslam added that sectors like tech and industrials have been notably “braced for whiplash.”

“Markets will dangle on each tweet and commerce speak whisper, with buyers betting on whether or not this delay is a real olive department or simply Trump reloading for a much bigger tariff showdown,” he mentioned. “Buckle up; this trip’s removed from over.”

– CNBC’s Silvia Amaro contributed to this report