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As markets began a new week, European stocks breathed a momentary sigh of relief. But for those watching the ongoing U.S.–EU trade drama, experts agree: the storm is far from over.

Trump Temporarily Hits the Brakes

On Sunday, U.S. President Donald Trump announced a postponement of his proposed 50% tariffs on European Union goods—originally set for June 1—after a call with European Commission President Ursula von der Leyen. The new deadline? July 9.

The initial tariff threat had shaken markets on Friday, sending European indices like the DAX and CAC 40 into a downward spiral. By Monday morning, however, indexes began to recover modestly, with the STOXX Europe 600 rising by over 0.6% in early trade. But market participants say the bounce is more of a pause than a pivot.

Trump criticized the EU in a series of social media posts, calling the bloc “very difficult to deal with” and accusing European leaders of dragging their feet in negotiations. Despite this, von der Leyen expressed optimism, saying the EU is ready to move talks forward “swiftly and decisively.”

A Six-Week Window to Avoid a Trade War

According to Holger Schmieding, Chief Economist at Berenberg Bank, the delay offers a narrow window to reach at least a framework for a deal—similar to the one between the U.S. and the U.K.

“If both sides have the political will, they could land on a deal involving a modest 10% U.S. tariff with minimal EU retaliation,” Schmieding said. “But if Trump ups the ante to 20% or 30%, the EU will be forced to respond in kind.”

The European Union exported approximately $506 billion worth of goods to the U.S. in 2023, with sectors like automobiles, aerospace, and pharmaceuticals most at risk. A sweeping tariff would not only impact trade but also potentially trigger retaliatory moves targeting U.S. exports like medical devices, technology products, and even agricultural goods.

Shock and Strategy: Trump’s Negotiating Style

Schmieding described Trump’s strategy as “shock-and-negotiate”—a tactic meant to unsettle opponents into accepting concessions. But he emphasized that the EU is unlikely to be bullied.

“The EU is an economic heavyweight. It’s not going to be cornered,” he said. “Negotiations must be among equals.”

Indeed, in the past, Trump’s “maximum pressure” approach yielded mixed results. While countries like the UK complied with U.S. trade requests, others—such as China—retaliated in full force during the 2018–2019 trade war, leading to market mayhem and cost increases for U.S. consumers.

Uncertainty Hurting Businesses and Consumers

Guntram Wolff, Senior Fellow at the Brussels-based think tank Bruegel, criticized the lack of clarity in U.S. demands.

“Massive uncertainty is the real problem,” Wolff said. “We don’t actually know what the Trump administration wants.”

He added that this ambiguity harms businesses, consumers, and the overall global supply chain. “It’s a poor strategy to keep everyone guessing,” he noted.

EU Holds Cards—But Chooses Patience

While the EU has so far opted for diplomacy, it is far from powerless. The bloc is a critical player in sectors like biotechnology, finance, and energy-efficient technologies. Should the situation deteriorate, it could retaliate in targeted areas, particularly services—a sector that accounts for over 70% of the U.S. GDP.

Yet for now, the EU seems committed to avoiding escalation. European Trade Commissioner Maros Sefcovic indicated ongoing talks with U.S. Commerce Secretary Howard Lutnick, signaling continued dialogue.

Markets Watching Every Word

Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, described the current environment as a “tentative risk-on rally,” fueled by hope rather than certainty.

“July 9 is shaping up to be a major flashpoint,” he said. “Trump’s unpredictable approach makes it hard to gauge whether this delay is a sign of goodwill or just the calm before a bigger storm.”

Tech and industrial sectors—already sensitive to supply chain disruptions—remain especially vulnerable. Analysts warn that any tweet or offhand remark could shake investor sentiment globally.

What’s Next?

While negotiations continue, analysts say that investors should expect continued volatility. Trade-sensitive stocks, global logistics firms, and consumer goods companies are especially exposed to fallout from rising tariffs or retaliatory barriers.

One thing is clear: This is not a resolution, but a pause. Investors, businesses, and policymakers would be wise to stay alert—and strapped in.

“This delay may feel like a detour, but we haven’t exited the highway,” Aslam warned. “And that highway could still lead straight into a tariff storm.”