Richard Warne, Senior Portfolio Manager, Copia Capital
With it hard to catch a breath amidst constant change and the uncertainty surrounding Donald Trump’s on-paused-and-off-again-tariffs I want to take a step back to consider the bigger picture.
For many, 2025 in the financial markets has so far been defined by Donald Trump’s economic policies. Now, however, may be the time to start thinking of his tariff strategy as being focused on deliberation rather than liberation. The recently deferred 50% tariffs placed on the EU could serve as a helpful case study to understand the use of tariffs to get people to the negotiating table.
Dead cat on the table
The market reaction on Friday 23 May to Trump’s surprise social media post revealing a 50% tariff on the EU was unsurprisingly negative. The tariff was initially due to come into effect on 1 June, and the announcement saw markets dip across Europe by two or three percent. It is interesting to note that the UK market saw little impact by close that same day – it was down just 29 basis points, an encouraging sign of robustness.
A weekend call between Trump and President of the European Commission, Ursula Van Der Leydon, indicated that the EU was willing to talk and the tariffs were subsequently deferred until 9 July. The markets in Europe have since recovered very quickly and the S&P rose earlier in the week when Trump hinted talks were advancing positively.
Markets have grown accustomed to trade negotiation being conducted consistently and smoothly and, generally speaking, that’s why they have responded negatively to these surprise tactics. It has been suggested Trump took this approach as part of the ‘dead cat on the table’ tactic from (what’s that?) his very own book The Art of the Deal, going in within an extreme offer to gain the upper hand. It is certainly apparent through recent deals, such as those with China, that he is willing to adjust and defer tariffs with negotiation.
The US government has previously indicated that it felt Europe has been reluctant about coming to the negotiating table. But since the threat of the 1 June tariff, the EU has indicated that it is willing to negotiate a deal swiftly ahead of the deferred deadline in July.
With this in mind, it is worth considering some of the key battlegrounds, under reported motivations and any areas where we could see some concessions and agreements in any trade negotiations.
Trade imbalances, AI regulations and obstructionism
The Trump administration’s most publicised grievance in relation to most nations it’s threatened with tariffs, has been trade imbalances. Perceived trade imbalances between America and other economies were used to calculate the initial ‘reciprocal’ tariffs on Liberation Day back in April.
Much to Trump’s lament, according to US figures, the trade imbalance between the EU and US is currently $230bn in the EU’s favour. Some sectors such as agricultural equipment, food, pharmacology and cars, are causing contention, although it’s hard to say with any degree of certainty what individual movement we might see in these specific areas. One option on the table that could help smooth negotiations is if the EU opts to import more purified liquid natural gas from across the Atlantic.
Beyond trade imbalances, a key bugbear is what the US government views as EU obstructionism. It is perhaps a reductive assessment and a crude phrase, but it has often been said that the US innovates, Europe regulates and China imitates. There is little doubt that America will be looking for Europe to relax its regulatory approach in any negotiations, making this a key outcome to look out for in any resolution.
Part of this concern from the US comes from the belief that regulation in the EU stops America gaining an upper hand in its tech war with China. You might remember J.D Vance’s widely reported attacks on Europe’s approach to free speech but less attention was given to his comments about European AI regulation. He specifically called on Europe to refrain from imposing any AI regulation that would interfere with Stateside innovation travelling across the Atlantic:
“America wants to partner with all of you, and we want to embark on the AI revolution before us with a spirit of openness and collaboration. But to create that kind of trust, we need international regulatory regimes that foster the creation of AI technology rather than strangle it. We need our European friends, in particular, to look to this new frontier with optimism rather than trepidation.”
Despite receiving less media interest so far, this could prove a key battleground for discussions between Europe and the Trump administration.
Expect the unexpected
So, how should we approach things going forward? I certainly won’t be expecting this type of surprise negotiation tactics – and the market volatility that often follows – to end in the near future. The legal trouble potentially facing Trump closer to home in relation to his ability to implement tariffs, makes all this even more uncertain.
An important takeaway from the tariff negotiating tactics is to evaluate where the key battlegrounds lie and to contextualise any immediate volatility and sell off stress. If Trump is limited in his use of tariffs, he may employ other tactics to get his way, and when he does, understanding what’s being fought over in negotiations will be key amidst all the noise and volatility.
It is encouraging that the markets seem to recover and even grow as discussions are confirmed and even speculated upon. They will remain vulnerable to volatility and as ever diversification and patience will continue to be important factors to successful investing.
This article is intended for regulated financial advisers and investment professionals only. Copia does not provide financial advice. This information is not intended as financial advice and should not be interpreted as such.
29th May 2025
What’s really behind Trump’s ‘dead cat on the table’ approach to trade?
Richard Warne, Senior Portfolio Manager, Copia Capital
With it hard to catch a breath amidst constant change and the uncertainty surrounding Donald Trump’s on-paused-and-off-again-tariffs I want to take a step back to consider the bigger picture.
For many, 2025 in the financial markets has so far been defined by Donald Trump’s economic policies. Now, however, may be the time to start thinking of his tariff strategy as being focused on deliberation rather than liberation. The recently deferred 50% tariffs placed on the EU could serve as a helpful case study to understand the use of tariffs to get people to the negotiating table.
Dead cat on the table
The market reaction on Friday 23 May to Trump’s surprise social media post revealing a 50% tariff on the EU was unsurprisingly negative. The tariff was initially due to come into effect on 1 June, and the announcement saw markets dip across Europe by two or three percent. It is interesting to note that the UK market saw little impact by close that same day – it was down just 29 basis points, an encouraging sign of robustness.
A weekend call between Trump and President of the European Commission, Ursula Van Der Leydon, indicated that the EU was willing to talk and the tariffs were subsequently deferred until 9 July. The markets in Europe have since recovered very quickly and the S&P rose earlier in the week when Trump hinted talks were advancing positively.
Markets have grown accustomed to trade negotiation being conducted consistently and smoothly and, generally speaking, that’s why they have responded negatively to these surprise tactics. It has been suggested Trump took this approach as part of the ‘dead cat on the table’ tactic from (what’s that?) his very own book The Art of the Deal, going in within an extreme offer to gain the upper hand. It is certainly apparent through recent deals, such as those with China, that he is willing to adjust and defer tariffs with negotiation.
The US government has previously indicated that it felt Europe has been reluctant about coming to the negotiating table. But since the threat of the 1 June tariff, the EU has indicated that it is willing to negotiate a deal swiftly ahead of the deferred deadline in July.
With this in mind, it is worth considering some of the key battlegrounds, under reported motivations and any areas where we could see some concessions and agreements in any trade negotiations.
Trade imbalances, AI regulations and obstructionism
The Trump administration’s most publicised grievance in relation to most nations it’s threatened with tariffs, has been trade imbalances. Perceived trade imbalances between America and other economies were used to calculate the initial ‘reciprocal’ tariffs on Liberation Day back in April.
Much to Trump’s lament, according to US figures, the trade imbalance between the EU and US is currently $230bn in the EU’s favour. Some sectors such as agricultural equipment, food, pharmacology and cars, are causing contention, although it’s hard to say with any degree of certainty what individual movement we might see in these specific areas. One option on the table that could help smooth negotiations is if the EU opts to import more purified liquid natural gas from across the Atlantic.
Beyond trade imbalances, a key bugbear is what the US government views as EU obstructionism. It is perhaps a reductive assessment and a crude phrase, but it has often been said that the US innovates, Europe regulates and China imitates. There is little doubt that America will be looking for Europe to relax its regulatory approach in any negotiations, making this a key outcome to look out for in any resolution.
Part of this concern from the US comes from the belief that regulation in the EU stops America gaining an upper hand in its tech war with China. You might remember J.D Vance’s widely reported attacks on Europe’s approach to free speech but less attention was given to his comments about European AI regulation. He specifically called on Europe to refrain from imposing any AI regulation that would interfere with Stateside innovation travelling across the Atlantic:
“America wants to partner with all of you, and we want to embark on the AI revolution before us with a spirit of openness and collaboration. But to create that kind of trust, we need international regulatory regimes that foster the creation of AI technology rather than strangle it. We need our European friends, in particular, to look to this new frontier with optimism rather than trepidation.”
Despite receiving less media interest so far, this could prove a key battleground for discussions between Europe and the Trump administration.
Expect the unexpected
So, how should we approach things going forward? I certainly won’t be expecting this type of surprise negotiation tactics – and the market volatility that often follows – to end in the near future. The legal trouble potentially facing Trump closer to home in relation to his ability to implement tariffs, makes all this even more uncertain.
An important takeaway from the tariff negotiating tactics is to evaluate where the key battlegrounds lie and to contextualise any immediate volatility and sell off stress. If Trump is limited in his use of tariffs, he may employ other tactics to get his way, and when he does, understanding what’s being fought over in negotiations will be key amidst all the noise and volatility.
It is encouraging that the markets seem to recover and even grow as discussions are confirmed and even speculated upon. They will remain vulnerable to volatility and as ever diversification and patience will continue to be important factors to successful investing.
This article is intended for regulated financial advisers and investment professionals only. Copia does not provide financial advice. This information is not intended as financial advice and should not be interpreted as such.