The European Union was outfoxed by President Trump into a trade deal, which was announced today, with a baseline tariff of 15% on everything except for steel.

The crucial turning point for the EU was when Trump rejected a deal proposed by his own negotiators, which led the EU to accept the 15% tariff.

Here are more details from The Financial Times. Their article is very long, so I’ve omitted quite a few details. Make sure you read to the end, or skip to the end if you prefer:

The path to the EU’s capitulation to Donald Trump’s trade blitz was set on April 10.

The sweeping “liberation day” tariffs that the US president had inflicted on most of the world earlier that month had sent financial markets into a tailspin as investors dumped US assets over recession fears. With the sell-off intensifying, Trump blinked and on April 9 dropped the tariffs to 10 per cent.

But Brussels blinked too. On April 10 it suspended its retaliatory tariffs and accepted the US offer of talks with a knife at its throat: 10 per cent tariffs on most of its trade, along with higher levies on steel, aluminium and vehicles.

Rather than join Canada and China with instant retaliation and inflict pain on US consumers and businesses, the EU — hamstrung by divergent views among its member states — chose to take the pain in the hope of securing a better deal.

Under the framework deal struck by European Commission president Ursula von der Leyen and Trump at his Turnberry golf resort on Sunday, the EU has swallowed a broad-based “baseline” US tariff of 15 per cent, including crucially for cars, but not for steel, which will be subject to a quota system.

Trump views the EU as a parasite, feeding off the lucrative US market while closing its own through regulation and standards. The US president has said the union was “formed to screw the US” and “nastier than China”.

The EU’s response to his return to power in January was flat-footed. Months of planning beforehand by a dedicated team, which included senior trade officials led by another Brexit talks veteran Sabine Weyand and von der Leyen’s trade adviser Tomas Baert, went up in smoke.

They had drawn up a three-point plan modelled on the approach taken in Trump’s first term: offer to reduce the near €200bn goods trade deficit by buying more liquefied natural gas, weapons and agricultural products. Second, offer mutual tariff reductions on each others’ goods.

If that failed, they would prepare retaliation and rely on a market response to a possible trade war, or increasing inflation in the US, to force Trump to back down.

But Trump moved faster than expected and by March had levied 25 per cent tariffs on steel, aluminium and cars.

At a meeting in Luxembourg that month, many trade ministers were on the war path.

Germany, France and a few others pushed for the commission to consult on using its new “trade bazooka”, the anti-coercion instrument. Designed after Trump’s first term to counter trade policy being used to pressure governments over other matters, it would allow Brussels to bar US companies from public tenders, revoke intellectual property protection and restrict imports and exports.

However, it was not clear a majority of member states agreed with the threatening move, diplomats said. Weyand told EU ambassadors, who met at least weekly to discuss progress, to show “strategic patience”.

When the UK struck a trade deal with Washington in May, accepting Trump’s 10 per cent baseline tariff, it encouraged those EU member states seeking a settlement, especially Berlin.

…

A deal for a permanent 10 per cent “reciprocal” tariff, hatched in July with US trade representative Jamieson Greer and commerce secretary Howard Lutnick, was flatly rejected by Trump, who instead threatened to raise levies on the EU to 30 per cent, rather than 20 per cent, from August.

And his threats had worked before. The retaliatory package the EU paused in April had been reduced from €26bn to €21bn after lobbying by France, Ireland and Italy to ensure bourbon was removed from the list, after Trump threatened to hit European distillers in return. If everything member states requested had been removed, only €9bn of goods would have been left on the list, officials told the Financial Times.

The months-long uncertainty over the direction of negotiations has also exposed divisions inside the commission itself. Weyand, the steely expert whose hardball approach to Brexit often outfoxed her UK counterparts, has consistently argued for a stronger stance towards Trump and the use of the EU’s retaliation tools, in opposition to the more dovish von der Leyen, multiple diplomats and officials told the FT.

…

But the commission president and her close aides argued that the potential damage from additional Trump measures — including threats to impose specific tariffs on critical sectors such as EU pharmaceuticals — meant the risk of a spiralling trade war was too great.

After Trump rebuffed the deal hatched by his own officials, the commission’s negotiating team concluded they had no option but to accept a US tariff of 15 per cent. They pitched the number to member state ambassadors this week.

There is no hiding the fact the EU was rolled over by the Trump juggernaut, said one ambassador. “Trump worked out exactly where our pain threshold is.”