A.M. Edition for May 27. President Trump gives the European Union a reprieve on his threat to impose 50% tariffs on June 1 if a trade deal isn’t reached. The WSJ’s Kim Mackrael in Brussels talks us through the negotiations. Plus, Trump weighs sanctions against Russia as Moscow pummels Ukraine with drones and missiles. And Canada’s new leader Mark Carney takes up the task of fixing the country’s relationship with Trump. Former Canadian diplomat Colin Robertson previews King Charles’s historic speech at the opening of parliament. Azhar Sukri hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What are the latest developments in US-EU trade negotiations?
President Trump's patience wears thin as Russia pummels Ukraine with drones and missiles. Plus, the EU gets a deadline extension for its trade talks with Washington. And Canada's new leader takes up the task of fixing the country's relationship with Trump.
Our previous prime minister, who I think Trump initially liked because he had the name and he's an attractive personality, because he was seen to diss Trump behind his back, that brought on his ire and the relationship never improved.
So Carney's very conscious of that. It's Tuesday, May the 27th. I'm Azhar Sukri for The Wall Street Journal, filling in for Luke Vargas. Here is the AM edition of What's News, the top headlines and business stories moving your world today.
President Trump is weighing sanctions against Moscow this week as he grows frustrated by Russian President Vladimir Putin's intensifying attacks on Ukraine, which killed at least 12 people this weekend.
Chapter 2: How is President Trump responding to Russia's actions in Ukraine?
That's according to people familiar with Trump's thinking, who added that the president is also growing tired with the slow pace of peace negotiations and is considering abandoning them altogether if a final push doesn't work. Here was the president on Sunday.
I'm not happy with what Putin's doing. He's killing a lot of people, and I don't know what the hell happened to Putin. I've known him a long time, always gotten along with him, but he's sending rockets into cities and killing people, and I don't like it at all, okay?
Just hours after Trump's comments on Sunday, Russia defied his calls for an end to the bombardment by launching another aerial attack on Ukraine, this time its largest ever drone and missile assault.
Ukrainian President Volodymyr Zelenskyy denounced the strikes and called for fresh economic sanctions against Russia, a step Trump had shown himself reluctant to take after his call last week with Putin. President Trump says he will hold off on implementing punitive trade tariffs on European products until July the 9th.
This weekend, he walked back a recent threat to impose 50% levies on EU products by June the 1st if the two sides couldn't reach a trade deal. It came after a phone call from the European Commission President Ursula von der Leyen requesting the extension. For its part, the EU said it agreed to fast-track the trade talks Our Brussels reporter, Kim McRaehl, has been tracking the negotiations.
Kim, give us an idea of just how important U.S.-EU trade is on a global scale.
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Chapter 3: What are the implications of the tariff deadline extension?
So the trade relationship is huge. The EU is the U.S. 's biggest trading partner and vice versa. And if you think about it in terms of the importance for the U.S. economy, trading goods and services with the EU actually accounted last year for almost 5% of the U.S. 's gross domestic products.
And the EU does have a pretty significant trade surplus with the US. Is that right?
Yeah, that is right. So this is an issue that President Trump raises quite a lot and clearly a big concern for him. But President Trump tends to focus specifically on the goods trade deficit that the US has with the EU. What that doesn't fully account for is that the US actually has a services surplus.
So, you know, if you combine both the goods trade and the services trade, there is still for the US a deficit overall in trade with the EU, but it's a lot smaller than what typically is raised by US trade officials.
Aside from that trade imbalance, what are the main sticking points in these negotiations?
The Trump administration is coming at these talks looking for some pretty significant concessions from trading partners generally and from the EU. And some of what they're asking for are changes to policy that the EU wouldn't tend to consider to be trade issues. One example I think that people have probably heard about is European countries' value-added tax. And that's a consumption tax.
It's not that different from a sales tax. It's used throughout Europe and a lot of other countries, not used in the US. Generally, it's seen as a non-discriminatory tax, but it's been an issue that President Trump has raised repeatedly as a major concern. And it's something that European countries' governments rely on the value-added tax for a lot of their revenue.
So that's one of the sticking points. And I think some of the others... that we've seen come up are the EU's food safety rules. President Trump sees those as, in some cases, a barrier to trade, to keeping U.S. products out, and the EU's digital rules.
So in some cases, we're talking about policies that have been developed at the EU level that the EU is not really interested in just giving these up in these talks.
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Chapter 4: What key issues are affecting US-EU trade talks?
We haven't seen at this stage any signs of a real breakthrough right now. But we've got a milestone coming up. There's a possibility of the U.S. trade representative, Jameson Greer, will probably be at the OECD meetings happening in Paris next week. That might be an opportunity for him to have a meeting with the EU's trade commissioner.
And then, you know, we've got just now a few more weeks until July 9th. So... There's a lot of recognition from the EU side anyway that it is a crunch time to try to get a deal if one is to be gotten.
That was Brussels reporter Kim McRae. Kim, thank you so much. Thank you. Well, following Trump's tariff climb down, US stock futures are pointing to a higher open after the long weekend. And in other markets news, China's industrial profits rose 3% in April, accelerating from a 2.6% rise the previous month.
The gains were likely helped by rerouting and front-loading by traders hoping to get ahead of rising trade tensions between Washington and Beijing. And back in the US, we exclusively report that Southwest Airlines has set the fee it will charge customers for their first checked bag at $35. It'll start charging for checked luggage tomorrow.
And looking ahead to the rest of the week, NVIDIA's earnings will take centre stage tomorrow afternoon. While Salesforce will also be reporting, then on Friday we'll get a read on May consumer sentiment, plus the April edition of the PCE Prices Index, the Fed's preferred measure of inflation.
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Chapter 5: What concessions is the Trump administration seeking from the EU?
And later today, Elon Musk's SpaceX is planning another test of its Starship, which it hopes to have ready for a Mars mission by next year. Coming up, Canada's new leader enlists royalty to sketch out his vision for the country and send a message to Washington. That story after the break.
In Ottawa, Prime Minister Mark Carney's government will lay out its agenda today as Parliament reopens for the first time since Carney replaced Justin Trudeau and won the general election.
Canada's head of state, Britain's King Charles, will be on hand to read the speech from the throne as Carney prepares to take on the biggest threat facing Canada's economy in a generation, and that is Donald Trump's trade war. For more, our Daniel Bach spoke to Colin Robertson, a former Canadian diplomat and fellow at the Canadian Global Affairs Institute.
Colin, I wanted to start with that throne speech. For our listeners who might not be familiar with Canadian parliamentary procedure, what's the importance of the King being on hand and is Carney trying to send a message here?
Carney is trying to send a message. Remember, the throne speech is the vision statement of a new government. So having King Charles and Queen Camilla come over with all the pomp and circumstance and pageantry that we've inherited from the Westminster-style system, this is going to get world attention.
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Chapter 6: What is the current status of negotiations before the July deadline?
But really, from Mark Carney's perspective, there's an audience of one, and that's Donald Trump, who more than anyone else appreciates that stagecraft is statecraft.
Now, later today in that throne speech, we'll hear what the government is planning. Carney has likened the current disruption in global trade to the period after the fall of the Berlin Wall. He managed the financial crisis and Brexit as a central banker. So what's his plan to manage President Trump and this current challenge?
Well, they go together. He says we have to redefine our relationship with the United States. It will not be the same given the uncertainty and lack of reliability on both the trading partnership and the security relationship. So it involves, first of all, getting our own house in order. And that means reducing internal trade barriers. In many ways, we're still 13 different principalities.
It's a bit like the European Union before capitalism. They became together. And he set July 1st as, in a sense, Liberation Day for Canada. Then he wants to build, baby build as he put it, infrastructure so that we can get our goods and services to market. And then that will allow us to do trade diversification.
At the same time, he also wants to improve our defense, again, for security reasons, and put money into that. And he's going to give people tax cuts and build housing because we've taken in a lot of immigrants and he continues to want us to attract the world's talents.
But we've got to do it in a way that it's not going to put pressures on housing, hospitals and education, schools, basically in Canada.
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Chapter 7: How are market reactions influenced by trade tensions?
You talked about how Carney will need to get Canada's own house in order to boost the economy. But he's obviously hoping he can sort something out with the Trump administration as well. What does his diplomatic playbook look like in that sense?
Well, it is diplomacy, and he's been very careful not to be critical of Donald Trump. Our previous prime minister, who I think Trump initially liked because he had the name and he's an attractive personality, because he was seen to diss Trump behind his back, that brought on his ire and the relationship never improved.
So Carney's very conscious of that, but he's also keeping some distance and pointing out to Trump, you've got to respect our sovereignty. And part of that, of course, is inviting the king over because he knows that Donald Trump has an affection for the monarchy.
So having the king come over to Canada and reminding him that indeed Canada is a sovereign, different country, and it's a kind of subtle message, but it will also send a message to the world, especially given we're going to be hosting the G7 in a couple of weeks.
You touched on Carney being respectful of Trump. He obviously went to Washington already and got the gilded Oval Office treatment, not the same treatment as Ukraine's president or South Africa's leader. But Donald Trump seems to respect him as the president does Britain's leader, Keir Starmer. How can the Canadian PM play that up in dealing directly with Trump?
Well, I think what he's trying to do is he's trying to find, in a sense, counterweights to the United States. The first objective has got to be, remember, you can't change geography, nor would we want to. The biggest market in the world is still the United States.
And having preferred access to the United States and having a security relationship as the most powerful military in the world makes an awful lot of sense. So that's the first objective. But as Carney has said, you've always got to plan for the worst. So he's looking for alternatives. And you look first to your old partners.
And that's why he went to Paris and met with Emmanuel Macron and then went to London to meet with Sakhir Starmer and has pledged that Canada will be part of the Starmer-Macron coalition, the willing to support Ukraine coalition. talking with them on industrial defense cooperation and production.
And in terms of our trade diversification, we have transatlantic and transpacific agreements, but we only use them to about 50% or 60% efficiency. And so that's something that we'll have to do more of, keeping in mind that it's not governments that do trade, but business.
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