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Ahead of a midnight deadline, President Trump has decided to extend tariff exemptions for European allies — but only for one month, the WSJ first reported and the White House confirmed.

Expand chart
Data: Census Bureau; Chart: Chris Canipe/Axios

The big picture: Trump isn’t just worried about China. The U.S. trade deficit with the EU has grown steadily — something Trump made sure to raise with German Chancellor Angela Merkel last Friday, and which had him considering opening a European front in his trade war.

The latest: Temporary exemptions from steel and aluminum tariffs granted to the EU, Mexico, Canada, Australia, Argentina and Brazil were due to expire at 12:01am. South Korea will get a permanent exemption, while the rest had their exemptions extended until June 1.

The backstory

The U.S. trade deficit with the EU ballooned from $17 billion in 1997 to $151.4 billion in 2017, and the driving force was German manufacturing. Last year, the U.S. bought $117.7 billion worth of imports from Germany — 27% of total imports from the EU.

  • The details: The major commodities the U.S. buys from Germany are cars and sophisticated machinery for factories. Trump has been particularly concerned by German autos, threatening steep tariffs.
  • The Germans have "made a very wealthy country on the backs of manufacturing," Thomas Duesterberg, a former Commerce Dept. assistant secretary for international economic policy now at the Hudson Institute, tells Axios. Germany is dependent on the U.S. market, and Merkel appears willing to work with Trump to address the trade deficit.

The bottom line: The European Union will be caught in the crossfire even if Trump aims his tariffs solely at China. And as the Trump administration threatens U.S. allies with tariffs, Beijing is courting European countries for support in case of a trade war.

The stakes

"We do need allies to take on China because it's so big now, and the subsidization and protectionism is so widespread," Duesterberg says. But Trump may alienate them.

  • Ahead of his visit to Washington, French President Emmanuel Macron said on Fox News Sunday: "It's too complicated if you make war against everybody. You make trade war against China, trade war against Europe, war in Syria, war against Iran. Come on. It doesn't work. You need allies. We are the ally."
  • The German government released a statement Sunday saying Merkel, Macron and U.K. Prime Minister Theresa May agree that the European Union is "prepared to defend its interests in the multilateral trade order."

Go deeper

Dan Primack, author of Pro Rata
9 mins ago - Politics & Policy

Democrats' billionaires tax explained

Illustration: Aïda Amer/Axios

There is now legislative language behind the push to tax American billionaires on unrealized capital gains, as Sen. Ron Wyden last night released his 107-page plan.

Why it matters: This would be a sea change in U.S. tax policy, which has only applied to realized gains (otherwise known as income).

55 mins ago - World

Scoop: Blinken protests Israel settlements approval in "tense" phone call

Benny Gantz (L) and Tony Blinken. Photo: Jacquelyn Martin/Pool/AFP via Getty

Secretary of State Tony Blinken protested the decision to approve 3,000 new housing units in Israeli settlements in the occupied West Bank during a tense phone call on Tuesday with Israeli Defense Minister Benny Gantz, three Israeli officials tell me.

Why it matters: This is the first time new construction in the settlements has been approved since President Biden assumed office, and the Biden administration had been privately pressing the Israeli government not to proceed.

The startup that wants to disrupt big internet providers

Illustration: Maura Losch/Axios

A new startup backed by funding from AOL founder Steve Case and Laurene Powell Jobs wants to break up broadband monopolies across the country.

Why it matters: Internet access has been crucial during the pandemic, but it's not ubiquitous, and it can be both slow and unaffordable in swaths of the country.