Donald Trump has presented the European Union with a massive dilemma. Should it surrender or fight?

The decision it makes would not only shape the future of the trade relationship between the EU and the US but, given that it’s Trump trying to dictate terms, could also threaten the security relationship the EU depends on.

Trump appears impatient that he hasn’t delivered the “90 deals in 90 days” the administration boasted it would deliver.Credit: Getty Images

It might also have implications for the future of global trade, with the EU – and others – already trying to put in place a new world trade order that doesn’t include the US at its centre and has a diminished role for China, whose existing torrents of exports to Europe could swell even further in a post-tariff environment if China’s exports to the US are shrunk and it redirects them elsewhere.

Trump ambushed the EU and Mexico on Saturday when he threatened to impose a 30 per cent tariff on their exports from August 1, separate from the “sectoral” tariffs on steel, aluminium, copper, autos and auto parts.

Trump told the European Commission President Ursula von der Leyen that there would be no tariffs if the EU or its companies decided to build or produce products in the US and allowed “full and open” access to US companies, without tariffs.

“If you wish to open your hitherto closed trade markets to the United States and eliminate your tariff and non-tariff policies and trade barriers, we may consider an amendment to this letter,” he wrote.

EU and US trade officials have been negotiating for months, with the Europeans trying to strike a deal that includes retaining Trump’s 10 per cent universal baseline tariff, reducing America’s proposed 17 per cent tariff on its agricultural exports and providing some concessions for European auto exports.

They’ll continue to negotiate in the hope that Trump’s letter is a negotiating tactic, designed to........

© The Sydney Morning Herald