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US president grants extension request

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European Commission chief says EU will move rapidly

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European shares recoup losses, euro rises

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US and EU trade representatives to speak on Monday

(Adds Italian business group, updates market reaction in

paragraphs 1, 3, 11-13)

By Philip Blenkinsop and Giulio Piovaccari

BRUSSELS, May 26 (Reuters) - U.S. President Donald

Trump's decision to drop his threat to impose 50% tariffs on

European Union imports from next month gave 'new impetus' to

trade talks, the EU said on Monday, as global stock markets

climbed and the euro rallied.

Back-tracking on the new tariffs he announced on Friday,

Trump on Sunday 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 EU Commission

chief Ursula von der Leyen.

The pan-European stocks index recovered to where it

was trading before Friday's surprise tariff announcement and the

euro rose to its highest since late April. Gold prices fell as

Trump's latest move reduced demand for the safe-haven asset.

"They agreed both to fast track the trade negotiations and

to stay in close contact," a European Commission spokesperson

said of Trump and von der Leyen's conversation.

US and EU trade representatives were due to hold talks later

on Monday.

"There's now also a new impetus for the negotiations, and we

will take it from there," the spokesperson said.

The U.S. president's about-turn reminded policymakers and

investors how quickly his trade policy could change, however,

and it was unclear how the EU would square its push for a

mutually beneficial trade deal with U.S. calls for steep

concessions.

Commerzbank currency strategist Michael Pfister said the

European Union could reach a deal with the U.S. by July 9 but

that Friday's announcement made clear the respite was temporary.

"It is questionable what has changed in terms of the

fundamental problems following a phone call," he said.

EU COMPANIES ON EDGE

Several businesses leaders said the sheer uncertainty made

it hard to plan anything.

Gianmarco Giorda, managing director of Italy's auto part

maker lobby group ANFIA, told Reuters he still hoped the talks

would succeed but that formulating strategies was complicated:

"U.S. duties are an additional source of concern in an

already difficult scenario for the Italian automotive industry."

Germany's family-owned LAPP Group, which makes everything

from cables and wires to robotics for factories, warned that

some of its specialised products would still be affected by the

volatile business environment.

"Unfortunately, current U.S. politics is characterised 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."

EU trade chief Maros Sefcovic held a video conference on

Monday with the CEOs of Mercedes-Benz, Volkswagen

, BMW and Stellantis ( STLA ), as

businesses wondered what plans, if any, they should make.

FRUSTRATION

Trump, who has repeatedly expressed disdain for the EU and

its treatment of the United States on trade, dropped the plan to

recommend a 50% tariff effective from June 1 after von der Leyen

told him that the EU needed more time to come to an agreement.

"I agreed to move it," Trump said before returning to

Washington after a weekend in New Jersey. "She said we will

rapidly get together and see if we can work something out."

Von der Leyen said in a post on X that she had a "good call"

with Trump and that the EU was ready to move quickly.

"Europe is ready to advance talks swiftly and decisively,"

she said. "To reach a good deal, we would need the time until

July 9."

The negotiations had been stuck, with Washington demanding

unilateral concessions from Brussels to open up to U.S. business

while the EU seeks an agreement in which both sides could gain,

according to people familiar with the talks.

The EU already faces 25% U.S. import tariffs on its steel,

aluminium and cars and so-called "reciprocal" tariffs of 10% for

almost all other goods, a levy that had been due to rise to 20%

after Trump's 90-day pause expires in July.

The levy could increase to 50% in a no-deal scenario, which

could raise consumer prices on everything from German BMWs

and Porsches to Italian olive oil and hurt

demand for French luxury handbags .

It was not clear, however, whether the 50% would be levied

on imports not subject to the U.S. 'reciprocal' tariff, such as

steel, cars and other products subject to investigations, such

as semiconductors, pharmaceutical products and lumber.

(Additional reporting by Christoph Steitz, Jan Strupczewski,

Amanda Cooper, Charlotte Van Campenhout, Ludwig Burger,

Christian Kraemer; Writing by Ingrid Melander; Editing by

Philippa Fletcher)