EU, US confident they'll reach tariff deal by July deadline
President Donald Trump in April announced a raft of so-called reciprocal tariffs on nearly all US commercial partners.
Image: Kamil Krzaczynski / AFP
The European Union and the US believe they can clinch some form of a trade agreement before a July 9 deadline, when Washington is set to impose a 50% tariff on nearly all EU products and the bloc plans to unleash its own series of countermeasures.
European Commission President Ursula von der Leyen told EU leaders behind closed doors at a Thursday summit that she was confident a deal could be reached before the deadline to avoid an economically damaging escalation, according to people familiar with the matter.
Von der Leyen said that the Trump administration had shared a new proposal this week. During the discussion, there was a shift in tone among the leaders, many of whom said they were ready to accept some degree of imbalance in a trade deal to avoid an escalation, said the people, who spoke on the condition of anonymity.
US Commerce Secretary Howard Lutnick echoed von der Leyen's comments in a Thursday interview with Bloomberg TV, saying that the EU had picked up the pace of the negotiations in recent weeks, laying out the groundwork for an accord.
A spokesperson for the commission, which handles trade matters for the EU, didn't immediately reply to a request for comment.
'Europe has done an excellent job, they're working hard,' Lutnick said. 'I'm optimistic - I think we can get a deal now.'
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European stocks extended their gains after the news, with the Stoxx Europe 600 Index up 1%. The benchmark was up 0.7% before the news. German bonds extended a small drop, sending the yield on the two-year to 1.87%.
Lutnick added that it made sense for a deal with the EU to come at the end of the process since the bloc is the US's largest trade partner, and as such the two have a deep and complex relationship.
President Donald Trump in April announced a raft of so-called reciprocal tariffs on nearly all US commercial partners, targeting trade barriers American companies face abroad, such as duties, domestic regulations and taxes. Those 50% tariffs are set to be imposed July 9.
In addition to the universal levy, Trump has introduced a 25% tariff on cars and a 50% duty on steel and aluminum. He's also working to expand tariffs on other sectors, including pharmaceuticals, semiconductors and commercial aircraft.
The US president has often blasted the EU – which he has said was created to 'screw' the US – over its goods surplus and perceived barriers to American trade.
The EU estimates that US duties now cover €380 billion (R8 trillion), or about 70%, of its exports to the US.
EU officials believe that the best-case scenario from the negotiations remains an agreement in principle that would allow the talks to continue beyond the July deadline, Bloomberg previously reported.
Since intensifying negotiations, the US and EU have been conducting in-depth discussions on critical sectors – such as steel and aluminum, automobiles, pharmaceuticals, semiconductors and civilian aircraft – as well as on tariff and non-tariff barriers, in addition to strategic purchases and economic security.
Thursday's leaders' debate didn't reveal the extent of the imbalances the bloc's capitals are prepared to stomach, according to the people. The EU, which has been seeking a mutually beneficial deal, will assess any end result and at that stage decide what level of asymmetry it's willing to accept.
Because of that, in parallel to the negotiations, the bloc continues to prepare countermeasures should talks yield unsatisfactory outcomes and may need to rebalance the agreement targeting some key sectors.
The EU has approved tariffs on €21 billion (R439bn) of US goods that can be quickly implemented in response to Trump's metals levies. They target politically sensitive American states and include products such as soybeans from Louisiana, home to House Speaker Mike Johnson, as well as agricultural products, poultry, and motorcycles.
The bloc has also prepared an additional list of tariffs on €95bn of American products in response to Trump's so-called reciprocal levies and automotive duties. They would target industrial goods including Boeing Co. aircraft, US-made cars, and bourbon. The EU is also consulting member states to identify strategic areas where the US relies on the bloc, as well as potential measures that go beyond tariffs.
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