Trump tariffs: Crunch time looms in US-EU trade talks – DW – 07/04/2025

DW

12 hours ago

EU and US negotiators are attempting to finalize a deal on tariffs before an impending deadline on July 9. Experts say a no-deal scenario is possible.
July 9 is almost upon us. That's when 50% tariffs could kick in on EU goods sold to the US if the two sides don't strike a deal beforehand.
US President Donald Trump hit EU goods with a baseline tariff of 10% on April 2, and a rate of 25% on imported cars and 50% on steel and aluminum. He threatened to ramp the 10% rate up to 50% by April 9, but a stock market selloff prompted by his tariffs led to a postponement.
In the meantime, EU and US negotiators have been working to strike an agreement ahead of the looming deadline, amid doubt in European capitals that EU Trade Commissioner Maros Sefcovic will be able to strike a deal that satisfies the member states.
European Commission President Ursula von der Leyen told a press conference on Thursday (June 3) that striking a comprehensive trade deal in 90 days was "impossible" but was hopeful of "an agreement in principle", specifically referring to the agreement the US and UK had struck as a model to aim for.
Those watching the negotiations closely say there have been sharp divisions among European Union member states over what concessions are acceptable and on what the US side should offer.
For example, German Chancellor Friedrich Merz has spoken of the need to strike a deal quickly, criticizing the European Commission's "complicated" approach.
"What is at stake here is the rapid resolution of a customs dispute, particularly for our country's key industries," he said.
Yet, French President Emmanuel Macron has decried the idea of tariffs being levied by powerful countries as "blackmail", without specifically referring to Trump.
Jacob Funk Kirkegaard, from the Peterson Institute for International Economics in Washington D.C., doesn't think the position of the German chancellor will be "acceptable" for all EU members.
"Merz has said a number of times that we can live with a 10% across the board tariff. As long as we don't get a 25% sectoral tariff on cars, etc.," he told DW.
While the comments of Sefcovic and von der Leyen have been somewhat conciliatory towards Trump and the US, Kirkegaard considers this to be an attempt to maintain unity amongst member states.
"That's basically the Commission trying to protect itself against attacks from member states, because it's obviously they would have to bear the consequences of a trade war," he said.
If the UK deal is a model, then the EU will likely have to live with 10% tariffs remaining in place on many goods, as the UK has done. The US-UK agreement cut the 25% tariff on UK cars to 10%, but the number of cars that can be imported on that duty is limited to 100,000 — roughly the amount of cars the UK sold to the US in 2024.
Any cars exported above that quota will be subject to a 27.5% tax. The EU sold over 700,000 cars to the US last year.
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However, Kirkegaard believes if the steep car, steel and aluminium tariffs remain at the same level, it will hard for many on the EU side to accept.
"As long as that's the case, there's not going to be a deal, in my opinion," he said. "It is ultimately not acceptable to the EU, which is an economy roughly comparable in size to the US, for US tariffs to go up and the EU's to not go up."
Kirkegaard argues that in a trade confrontation between economies of the same size, tariffs should "go up together and down together."
Bill Reinsch, a senior economics adviser with the Washington-based Center for Strategic and International Studies (CSIS), thinks a UK-style agreement is the most likely outcome.
However, what is most important for Trump is the perception that he has "won" rather than what has actually been agreed, Reinsch told DW.
"What matters for him is the Oval Office meeting, that so-and-so was agreed, and now everything's going to be fine. So it wouldn't surprise me if in the end there's a 'quote, unquote agreement' with the EU."
He argues it would be prudent for the EU to focus on policy outcomes rather than perceptions of who has won. "Let him have the win. If you let him have the win, what he wins doesn't matter. So you don't have to give up very much if you handle it right."
One area where there has been a lot of speculation around possible EU concessions, away from tariffs, is on its digital policy, particularly its Digital Services Act and possible digital sales taxes.
Germany has been considering a 10% tax on the sales of US digital giants such as Google and Meta's Facebook in Europe. Trump has spoken out against such plans and this week Canada dropped a digital sales tax proposal to keep trade talks with the US alive.
Reinsch thinks the EU should prevent member states introducing these taxes because "Trump is right" in his position, he argued, and that is "not even rhetoric."
"I think they are clearly discriminatory against some American companies," he said, adding that from a policy standpoint "it's totally the wrong approach."
"If you want to build European competitors, you don't do that by dragging down the competition this way. You do it by building European competitors and creating viable options," said Reinsch.
As the July 9 deadline looms, serious consideration is being given to the implications of a negotiations blow-up.
The EU has described thetrans-Atlantic trade relationship as "the most important commercial relationship in the world," as bilateral trade in goods and services reached €1.6 trillion ($1.88 trillion) in 2023, according to EU Commission data.
Kirkegaard says a no-deal scenario could lead to the requirement for fiscal stimulus in some EU countries due to "short-term volatility."
But the EU can cope with that, he believes.
"We would not be back in [financial crisis of] 2008 or facing a situation similar to even the energy price shock that happened after the Russian invasion in 2022 — absolutely not," he said.
He expects the EU to "lose half a percentage point of growth" this year and next year, which was "not trivial," but at the same time "nothing we couldn't live with."
Reinsch has a different view, saying a failure would be "bad news" for everybody.
"I think in terms of actual trade, it probably would not be as impactful as a blow-up with China because we buy so much more from China. But in terms of disrupting the relationship and particularly disrupting trans-Atlantic investment, I think it would be a huge problem."