The EU is entering a crunch week with only two days of talks left to secure a trade deal with Washinton to avert Donald Trump’s threatened 50% tariff on its imports into the US.
According to the US treasury secretary, Scott Bessent, on Friday, the negotiations – which continued over the weekend – are focussed on 15 to 18 agreements with important partners, while Trump warned of import tax rates of up to 70% on others.
The uncertainty created by Washington has sent shock waves through the global economy. Businesses have paused investment and the dollar posted its worst performance in 50 years in the first half of the year.
With the clock ticking down to Trump’s 9 July deadline, the European Commission remains uncertain how he will treat the bloc, threatening €1.6tn of transatlantic trade.
“Among member states, the big question will be whether we should reach a deal at all costs to avoid a trade war, or show muscle if the deal is not good enough,” one EU diplomat said.
The German chancellor, , has said he wants a quick UK-style deal to avert a full-scale trade war, while the French president, Emmanuel Macron, favours holding out for a better deal if a rushed deal is “imbalanced”.
Giving a flavour of the aggression shown towards the EU, which Trump once called “nastier than China”, Brussels’ trade commissioner, Maroš Šefčovič, was threatened last week with 17% tariffs on food imports during talks with senior members of the Trump administration including Bessent.
After announcing punitive “liberation day” tariffs on nearly all countries on 2 April, Trump paused them for 90 days a week later.
The US is now on the brink of launching a trade assault on dozens of countries as the 90-day period expires on Wednesday with only two deals in the bag – the UK and Vietnam.
This has raised questions about the EU’s ability to strike anything other than a political framework agreement to extend talks while a baseline 10% tariff and other levies on cars, steel and aluminium remain in place.
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As talks move into the final and most sensitive stage, industries across Europe are bracing themselves for fresh challenges, deal or no deal. They expect the cost of Trump’s presidency will be the minimum 10% on exports to the US, five times higher than the 2% average before he was elected last year.
That is because after months of threats of retaliatory tariffs on everything from Bourbon to Boeing aircraft, the EU conceded last week that a comprehensive trade deal was unattainable.
Instead they are aiming for an agreement in principle, or “framework deal” which will look more like the UK deal struck in May, which came into force at the end of last month.
Many EU diplomats initially dismissed the UK deal as thin and legally dubious under World Trade Organization rules, and held out hope that the bloc’s greater economic clout with €1.6tn of transatlantic trade compared with the UK’s £314bn (€363bn) would help it secure a better deal. But now they realise a bare-bones deal may be the best they can get.