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EU ambassadors meet in Brussels today amid growing concern that the trade deal struck by European Commission chief Ursula von der Leyen and President Donald Trump in July is on shaky ground.

As Bloomberg reported this morning, the US has demanded concessions that potentially undercut the deal struck in Scotland. Concessions around the bloc’s digital legislation is one of Washington’s main demands.

Complaints from Washington about the EU’s tech rules are nothing new, but the Trump administration has ramped up its criticisms of the EU’s current rulebook, specifically its flagship Digital Markets Act (DMA) and Digital Services Act (DSA). The EU has previously said that these rules won’t be changed.

The US is also demanding exceptions on climate-related and corporate compliance rules. The accord between the two sides during the summer already ceded ground to the US in these areas, committing to “flexibilities” for US companies when it comes to the Carbon Border Adjustment Mechanism (CBAM), one of the bloc’s flagship climate policies, which will put a levy on emissions-intensive products coming into the EU.

Brussels also said it would address the concerns of the US regarding its deforestation regulation and its much-maligned corporate reporting directives that were already getting pushback from EU businesses.

Vehicles at the Port of Newark Auto Terminal in Newark, New Jersey, US. Photographer: Michael Nagle/Bloomberg

The key challenge for Brussels is meeting the US demands on climate rules without looking like it’s selling out its green credentials in order to appease Trump.

Already, other trading partners have spied an opening to snag their own concessions. South Africa has called for special treatment, citing the provisions in the EU-US trade deal. The UK, already reeling from the announcement of new EU steel tariffs yesterday, is hopeful of an exemption on CBAM before it enters into force next year.

With ambassadors due to take stock of the broader US-EU trade relationship today, Brussels potentially has one ace up its sleeve. The European Parliament has yet to approve the deal, and is unlikely to do so if the US changes the goalposts. The US may want to extract as many concessions as possible, but officials believe that Trump does not want to blow up the whole agreement.

Also on the agenda today is the 19th Russian sanctions package, with EU countries yet to agree to the proposal mainly due to Austrian efforts to secure compensation for Raiffeisen bank for damages it paid to Rasperia, a company linked to businessman Oleg Deripaska. 

The Latest

• Outgoing French Prime Minister Sebastien Lecornu expressed optimism that an accord could be reached to allow the formation of a new government without fully endorsing a proposal by the Socialists to rethink a controversial pension law.
• The European Commission formally published its “safeguard” proposals today that would protect farmers in the event of a potential spike in imports due to the Mercosur trade deal with South America. 
• The EU will not row back on diversity, equity and inclusion policies that are under threat in the US, instead viewing strong equality legislation as a competitive advantage, the bloc’s equality chief Hadja Lahbib said in an interview.
• Bundesbank President Joachim Nagel backed a joint budget for EU defense spending, suggesting that this could be financed by common debt.
• The UK’s steel sector warned of the likelihood of an existential crisis after the EU proposed raising tariffs to shield its own ailing sector.
• European Central Bank Governing Council member Olli Rehn warned that there’s a danger that consumer-price growth will slow below the 2% goal.

Seen and Heard on Bloomberg

ECB Governing Council member José Luis Escrivá pushed back against expectations of a rate cut, instead pointing out that policymakers don’t have a bias toward cutting interest rates at present and could equally end up hiking them instead. The Bank of Spain governor, speaking in an interview today at the Bloomberg Future of Finance conference in Madrid, insisted that the current stance doesn’t preclude a move either up or down.

Chart of the Day

BMW shares slid the most since November after the company lowered its financial guidance on weak sales in China and tariff costs, underscoring the difficulties Germany’s export-reliant auto industry is facing. Western manufacturers are losing ground in China to homegrown rivals such as BYD and Xiaomi, which are offering feature-packed EVs at low prices. 

Coming up

• European Parliament’s plenary session continues in Strasbourg today and tomorrow
• Eurozone finance ministers meet in Luxembourg tomorrow
• European Commission president Ursula von der Leyen delivers speech at Global Gateway conference in Brussels tomorrow

Final Thought

Macron, right, and Le Maire in November 2017. Photographer: Marlene Awaad/Bloomberg

As the French establishment desperately tried to stitch together its third government in a year, Bruno Le Maire suddenly found himself trying to patch up a long-running feud, William Horobin writes. Le Maire, 56, had abandoned the center-right Republicans in 2017 to begin a seven-year stint as finance chief under President Emmanuel Macron. On Sunday night, Macron brought Le Maire back as minister of defense as he tried to pack his government with loyalists. It was a high-stakes gamble by Macron, who has watched his dominance of French politics unravel since calling an ill-judged snap election for the National Assembly.  

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