WSJ What’s News - Europe Gears Up for U.S. Trade Fight

Episode Date: July 21, 2025

A.M. Edition for July 21. The European Union is changing its tune as trade talks with the U.S. take a turn for the worse. WSJ editor Dan Michaels explains what this could mean for the world’s largest trading relationship. Plus, how Treasury Secretary Scott Bessent has been trying to convince President Trump not to fire Fed Chair Jerome Powell. And why taxing the super rich can backfire on governments, as the U.K. seems to be learning to its detriment. Azhar Sukri hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to this year's championship game. This is the big one. With Amex Platinum, you have access to an annual dining credit to some of the hottest restaurants around town. Score! So you can raise the bar on game night. That's the powerful backing of Amex. Terms and conditions apply. Learn more at amex.ca slash yamx. The European Union is gearing up for a trade fight with Washington, plus how the US Treasury Secretary has

been steering Trump away from firing the Fed chair. And the perils of raising taxes on the super rich, as the UK seems to learn a bitter lesson. A lot of billionaires, a lot of millionaires say they're leaving, they're going to Dubai, they're going to Italy, they're going to Switzerland. So that's always been the fear that it's actually going to end up costing the government money. It's Monday, July the 21st. I'm Azhar Sukri for The Wall Street Journal. Here is the 8am edition of What's News, the top headlines and business stories moving your world today. The European Union thought it was on the brink of a trade deal that would help the bloc avoid higher US tariffs and protect the world's biggest trading relationship.

Now we are exclusively reporting that EU member states are pressing the bloc's executive body to prepare new targeted measures to hit back against US companies if a deal can't be reached by the August 1st deadline set by Trump. The EU had been working towards an agreement that would have kept baseline tariffs at 10% until US officials said President Trump was demanding further concessions. Still, speaking to CBS's Face the Nation yesterday, Commerce Secretary Howard Lutnick doubled down on the August 1st deadline for the EU to reach a deal. These are the two biggest trading partners in the world talking to each other. We'll get a deal done.

I am confident we'll get a deal done. Okay. And it will be great for America because the president has the back of America. So I think all these key countries will figure out it is better to open their markets to the United States of America than to pay a significant tariff. And Donald Trump has made that point clear. For more, I'm joined now by our Brussels Bureau Chief, Dan Michaels. Dan, what are we hearing about how the EU is now approaching these talks? The EU has shifted in its position in internal discussions from a debate among the 27 members about how hard to push back with essentially two camps until recently, one led by France

that was more hawkish advocating a stronger pushback and one more dovish led by Germany trying to soften things and avoid confrontation with the US. But as of late last week, it seems the Germans have swung more towards the French position, getting essentially fed up with the US. And it seems the Germans now are more willing to discuss a more muscular response to US tariffs, you know, if they come in, in a way that the EU finds really unfavorable. And then just remind us how we got here and how the relationship between the EU and the

US on the trading front has deteriorated. Sure. It's important to remember that President Trump, since his first term, has been very critical of the EU. He has said a few times things like that the EU was created to screw the US and then the Europeans take advantage of the US on trade. The EU has tried to negotiate while also arguing that it disagrees with Trump's position on that because Trump is very focused on the imbalance in trade in goods, physical goods. The EU has a trade surplus in goods, but actually when it comes to services, the US has a surplus. So the EU argues that things aren't really as imbalanced as Trump presents them. So they've gone into negotiations and the EU has tried to put on the table offers like

buying more US fuel and energy products, agricultural products, more recently also along with NATO, more weapons systems from the US. And this is hard to understand exactly what's going on, especially for the Europeans. They're multiple players. There's the president, then there's the commerce secretary, the treasury secretary, the U.S. trade representative, and the Europeans have gotten frustrated by getting conflicting and changing messages from them. So European patience seems to be wearing thin. So could any EU retaliation extend into the services arena, which as you said, actually forms a very, in fact, probably a larger proportion of the overall trade relationship? The EU is for the first time looking at targeting services.

It's something that hasn't been done to a large extent really anywhere other than things like digital taxes. It's really a new realm partly because the service economy is relatively new compared to the trade in goods, things like cars or shirts or food. And it's much easier to put tariffs on shiploads of goods coming into ports than it is to figure out what is a tariff on a streaming video or financial transactions look like. And so how one puts a tariff on either digital data or financial services is something people are still scratching their heads about, but the EU seems to have some ideas on how to do it.

And it is really the area where the US is most vulnerable to the EU. Dan Michaels, thank you ever so much. Always good to talk with you. Thanks. Japan's ruling coalition has been dealt a significant blow in parliamentary elections, threatening to derail US trade talks just weeks before punishing tariffs are set to take effect. Prime Minister Shigeru Ishiba has gambled that his tough stance on trade with President

Trump would help cement his shaky grip on power, but his coalition has now lost control of parliament's upper house, having already lost its lower house majority in a vote in October. Ahead of voting, polling showed Japanese voters were far more focused on inflation and immigration than they were on US tariffs. And we are exclusively reporting that Treasury Secretary Scott Besant has been laying out his case to President Trump for why he shouldn't try to push out Fed Chair Jerome Powell. Trump has threatened to end his contract before it's due to expire in May, but as finance editor Alex Frangos explains, that threatens to derail the US economy. A few months ago when Trump launched his trade war, economists got very pessimistic and business

leaders as well. And there's a sense that the economy is kind of holding up better than people expected. Treasury Secretary Besson went to President Trump this week to try to persuade him that it's really not worth his while to try to fire Jerome Powell, partly because, you know, look, the economy is holding up okay. And history has showed us when central banks work in conjunction with the Treasury to keep borrowing costs low for the government, you get a lot of inflation. So that was the pitch that he was making to the president. Coming up, we look at why the UK's attempt to tax the super-rich is backfiring and a closer look at this morning's major earnings, those stories and more after the break. Earnings are in full swing, with Stellantis saying this morning that US tariffs cost the

carmaker around $350 million in the first half of the year, resulting in a net loss. The Jeep maker said vehicle shipments fell, driven by a 25% drop in North America. On the other hand, Ryanair's first quarter net profit more than doubled, thanks to an early Easter holiday and a 21% increase in fares. More passengers flew with Ryanair, and the low-cost carrier expects that growth to continue. That said, heavily delayed deliveries of new Boeing aircraft is weighing on traffic, with second quarter fares expected to be lower. Alaska Airlines has resumed operations after grounding its entire fleet for several hours

yesterday evening due to a software outage. The airline said it requested a temporary, system-wide ground-stop for Alaska and Horizon air flights because of the IT issue, and says it'll now take some time to get overall operations back to normal. And Microsoft has issued an alert about what it described as active attacks targeting its SharePoint server software and urged customers to install new security updates. Organisations typically use Microsoft SharePoint to create intranet websites, store information and facilitate file sharing. Microsoft said that if customers can't enable the new protections, they should disconnect their servers from the internet until a security update is available.

And finally, a British attempt to tax the super-rich is off to a bumpy start. Close to 75,000 people were estimated to be using a tax loophole dating from 1799 that allowed foreigners living in the UK to pay tax, only on what they earned domestically. That is until the so-called non-domiciled or non-dom status was abolished by the British government in April. Journal Markets reporter Chelsea Dulaney says some wealthy expats are getting out, sparking questions about whether the move will raise any money at all. The UK is having a lot of problems right now balancing its budget. They took the plunge, they eliminated the system and they did that with the anticipation that some of these billionaires

and these rich people would leave. And it was hoping that this would bring in about $45 billion by 2030. There's definitely been a bit of a worry now that so many of them have left or are planning to leave that it's actually going to end up costing the government money. And Chelsea says the UK is not alone in trying to tackle the age old question of how to collect more taxes from the ultra wealthy. You know, we're seeing income inequality really explode. A lot of governments don't have as much money as they'd like to.

They're trying to raise money. So taxing the wealthy has become an answer to a lot of those questions of how do we reduce inequality, how do we fund social priorities, including in New York right now where the Democratic mayoral nominee Zoran Memdani has talked about the so-called millionaire's tax. The fear of that has always been that they'll leave and they'll take their businesses and that money with them. And that's it for what's news for this Monday morning. Today's show is produced by Daniel Bach and Kate Bullivant.

Our supervising producer was Sandra Killhoff. I'm Azhar Sukri for The Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening.