Trump drops tariff threat against EU after weekend call with bloc chief

A weekend telephone call between U.S. President Donald Trump and EU chief Ursula von der Leyen gave "new impetus" to trade talks, the EU said on Monday, after Trump dropped his threat to impose 50 per cent tariffs on imports from the European Union next month.

Trump restored a July 9 deadline to allow for talks between Washington and the 27-nation bloc to produce a deal after what he said was "a very nice call" with von der Leyen on Sunday, which an EU spokesperson said had been initiated by her.

The euro hit a one-month high against the dollar on Monday, while European shares surged and were poised to recoup the previous session's losses. Gold prices fell as Trump's latest move reduced demand for the safe-haven asset.

The U.S. and EU trade representatives were due to hold talks on Monday afternoon, European time, the European Commission spokesperson said, declining to give any information about the content of the call between Trump and von der Leyen.

"There's now also a new impetus for the negotiations, and we will take it from there," the spokesperson said. "They agreed both to fast-track the trade negotiations and to stay in close contact."

German Economy Minister Katherina Reiche called for tariff negotiations to proceed calmly. "We have to find a common path," she said.

Trump had said on Friday that he was recommending a 50 per cent tariff effective from June 1, expressing frustration that trade negotiations with the EU were not moving quickly enough. The threat roiled global financial markets and intensified a trade war that has been punctuated by frequent changes in tariff policies toward U.S. trading partners and allies.

The U.S. president's softened stance two days later marked another temporary reprieve in his erratic trade policy, even if the latest shift in decision-making reminded policymakers and investors how quickly circumstances could change.

"It is possible that a deal with the European Union will be reached by 9 July," Commerzbank currency strategist Michael Pfister said.

"However, it is questionable what has changed in terms of the fundamental problems following a phone call. One thing should be clear after Friday's announcement: the brief respite from tariffs that we enjoyed was only temporary."

EU trade chief Maros Sefcovic was scheduled to have a video conference on Monday with the CEOs of Mercedes-Benz, Volkswagen, BMW and Stellantis, as businesses wondered what plans, if any, they should make.

Despite the relief, Germany's family-owned LAPP Group, which makes everything from cables and wires to robotics for factories, warned that some of its specialized products would still be affected by the planned tariffs, and the volatile business environment.

"Unfortunately, current U.S. politics is characterized by unpredictability, individual interests and populism," CEO Matthias Lapp told Reuters.

"Germany's good transatlantic relations have been built up over decades of diplomatic work and mutual understanding. However, confidence in their stability is currently suffering massive damage," he said.