EU-US trade talks: Crunch time looms with no deal in sight – DW – 07/04/2025
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.
To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video
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."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
DW
34 minutes ago
- DW
Will Germany's military spending bring economic growth? – DW – 07/04/2025
The German arms industry is thriving thanks to a major state-run investment program. But will the country's wider economy benefit? March 18, 2025, will go down in Germanhistory as the day when a two-thirds parliamentary majority cleared the way for the country to take on unprecedented debt. German lawmakers approved an infrastructure investment package worth billions, while also lifting the cap on national defense spending. The aim is to provide the necessary funds to make Germany and its armed forces, the Bundeswehr, "ready for war," as Defense Minister Boris Pistorius has repeatedly demanded since Russia's 2022 invasion of Ukraine. Shortly after he took office as chancellor earlier this year, Friedrich Merz said he wanted to make the BundeswehrEurope's strongest conventional army. This spending spree is great news for companies that build roads and bridges, lay rail tracks and manufacture high-speed fiber-optic internet cables. The German defense industry stands to benefit even more. For decades, the sector had been losing economic importance. Who in Germany, after all, was interested in buying tanks? In 2020, shares in Rheinmetall, Germany's largest arms manufacturer, sold for €59 — by June 2025, they were trading between €1,700 and €1,800 ($2,116) each. Swiss bank UBS has forecast further share price growth, currently estimating a rise to €2,200. These are golden times for German arms manufacturers, with industry top brass insisting that defense spending not only benefits their sector but the economy as a whole. "Defense spending is a gigantic economic stimulus program," Oliver Dörre, CEO of defense contractor Hensoldt, told DW at an event in Frankfurt in March. Lawmakers hope the spending spree will help modernize German industry and boost economic growth. Economists, however, were less euphoric even before parliament agreed the investment package. "The increase in government military spending will give the German economy a boost, but the economic stimulus will be rather moderate," wrote Tom Krebs, an economics professor at the University of Mannheim, in a statement for the Bundestag's budget committee. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Krebs and his colleague Patrick Kaczmarczyk conducted a study examining the extent to which additional government spending will increase Germany's gross domestic product, or total value of economic output. The researchers found that military spending would have a maximum impact of 0.5 — meaning that, in the best-case scenario, €1 of government spending will generate just 50 cents of additional economic activity. Investments in infrastructure, education, child care facilities, day care centers and schools would, however, double or even triple the return on investment. "From an economic perspective, the planned militarization of the German economy is a risky gamble with a low overall economic return," said Krebs. The explanation for this is simple. After a tank is built, it is either parked somewhere or, in the worst case, destroyed in battle. A tank, in other words, does not create any additional economic value. Defense spending is, however, like taking out insurance. You make the payments so that you have protection in case of an emergency. If you don't need the insurance, the money is simply gone. If, on the other hand, the state invests in transport infrastructure, goods can be transported to businesses via these roads, bridges and railways. There, they can be used to manufacture products that are then sold. If kindergartens are built, parents are freed up to work and earn money. Investments in schools mean young people get the education they need for their future. Defense production currently only contributes very little to overall economic growth, although German arms companies have seen orders surge. Rheinmetall, for example, had an order backlog worth some €63 billion ($74 billion) in the first quarter of 2025. Before the start of the Ukraine war, it stood at just over €24 billion ($28 billion). Other German defense companies are also busy, with production at full capacity. But if supply is limited and demand increases, this usually causes prices to are already warning this could happen. Krebs and Kaczmarczyk write that "greater defense spending does more to grow arms companies' profit margins and dividends than improve [Germany's] defense capabilities." Companies currently operating outside the defense sector are also looking to get in on the business, especially those suffering amid Germany's economic malaise. Cologne-based Deutz AG, for example, produces engines for lifting platforms, agricultural vehicles, excavators and other large machines. Due to the weak economy, company sales slumped by some 12% in 2024. Deutz, which also manufactures engines for military vehicles, is now set to significantly expand this previously small line of business. "Defense is a very important and interesting market for us with great growth potential," CEO Sebastian Schulte told DW in March. German carmaker Volkswagen is another example. The company is in crisis and has already cut thousands of jobs, with its Osnabrück plant facing closure. Now, Rheinmetall is looking into whether tanks could be built there instead. These are two examples that show how greater defense spending could benefit the wider economy by offsetting losses, rather than generating additional growth. That said, even companies that are doing well are switching to arms production, with demand surging in the metalworking industry.
DW
an hour ago
- DW
Do EU structures enable far-right misuse of public money? – DW – 07/04/2025
A leaked audit accuses far-right parties of improperly spending millions in EU funds. Critics say it's not just a scandal but a symptom of the EU system's deeper problems. From donations to dog shelters to questionable contracts with politically affiliated companies, far-right members of the European Parliament have been accused of funnelling public funds towards personal or ideological allies. An internal parliamentary audit obtained by a group of investigative journalists from German broadcaster ARD's magazine show Kontraste, German newspaper , French newspaper and Austrian media outlet, Falter, reveals that the now-defunct far-right Identity and Democracy group, commonly referred to as ID, may have spent at least €4.3 million ($5.1 million) in EU operating funds on what the European Parliament's own administration calls "unjustified and potentially unlawful" transactions. Every year the European Parliament allocates funds for the administrative and operational expenses of each political grouping in it, usually between €6 million to €7 million annually. Those funds are meant to support legislative work — such as funding policy research, running public events related to EU politics, or producing communications materials that explain their activities to citizens. Around 5% of this budget can be transferred to external organizations but donations to local charities, national campaign efforts, or groups with no clear link to EU-level work are explicitly prohibited. However the internal audit alleges that around 80 of the ID group's expenses do not meet that requirement. The improper spending allegedly includes fictitious service contracts, improper tender procedures and donations to associations unrelated to parliamentary activities and connected to far-right figures, the investigating publications reported. The scale of the findings suggest that this was more than administrative sloppiness and raises deeper questions about how the EU's own structures may be enabling such abuses. As an example, the report says the ID group — which disbanded in the summer of 2024 but previously included Marine Le Pen's Rassemblement National, or RN, Germany's Alternative for Germany, or AfD, Italy's Lega and Austria's Freedom Party, or FPÖ — donated €1,000 ($1200) to the president of a French-Russian cultural association, Teremok. She is the spouse of Gregoire Eury, an RN councillor for the Grand Est region. This was just one of many connections between the associations that benefited from ID donations and far-right officials from ID-affiliated parties. Other donations simply reflected the broader political affinities of ID elected officials. In Germany, SOS Leben (or "SOS Life," in English), which is linked to the AfD, received €3,500 to support anti-abortion campaigns. In France, €1,000 went to the Catholic identitarian association SOS Calvaires to restore a parish. Around €600,000 reportedly landed with , a far-right Austrian newspaper close to the FPÖ, with ID paying for advertising far above market rates. Money also went to animal shelters and charities — not necessarily a bad thing, but also not acceptable under EU rules. French companies close to Marine Le Pen were among the biggest beneficiaries: Two firms tied to her longtime political allies reportedly received more than €3 million in total. One of them has previously been implicated in another EU funding scandal. The former secretary general of now defunct ID group, Philip Claeys, denied any wrongdoing and told the investigating journalists that all the payments were "duly invoiced and justified." Claeys said that an external auditor and then the European Parliament had approved the ID group's yearly financial statements. Donations by the group were apparently based on a rule called "Article 68." Only thing is, the investigative journalists found, there's no such thing as "Article 68." Yet it appeared in multiple years of published accounts without triggering alarms. When contacted, the Belgian auditors responsible declined to comment. "This is not an isolated incident," Nick Aiossa, director at Transparency International EU, told DW. "This seems to be a scheme that that ran over many years, involved many entities cross-border." Without the proper checks in place, he adds, this could easily happen again today. It is true that this is far from the first time that European MEPs have been caught misusing EU money. In March, Marine Le Pen was sentenced in France to four years probation and banned from holding political office after being found guilty of embezzling European parliamentary funds through a fake jobs scam. She has appealed the ruling. And it's not only the far right. Past scandals have implicated politicians across the spectrum. The so-called Qatargate scandal in 2023 exposed bribery and cash-for-influence schemes involving current and former MEPs. And in 2018, investigative journalists went to court seeking further information on what's known as "general expenditure allowance," or GEA, an amount paid monthly to MEPs for expenses like running an office and travel. MEPs get over €4,000 a month in GEA — this adds up to over €40 million a year — but don't have to provide information on how they've spent it. At the time, investigative journalists found over 200 of what they called "ghost offices." A court denied the journalists the information and the lack of transparency and accountability around the GEAs has remained a sore point. Despite repeated scandals, the European Parliament has failed to implement meaningful reforms, Aiossa says. He argues that the institution has done itself lasting damage — first by refusing to respond decisively when issues arose, and then by continuing to tolerate weak accountability and integrity systems. The result, he warns, is a steady erosion of public trust. At the core of the problem lies the structure of parliamentary finances, according to Aiossa. Instead of managing budgets directly, the European Parliament delegates this responsibility to the political groups themselves. Groups are required to conduct annual audits but those are done according to random sampling, which means misuse of funds may not be detected. This means that the responsibility of how party group money is spent lies primarily with its party leadership, particularly its financial officers and secretary general. This, according to Aiossa, has to change. "The parliament needs to take a much more proactive approach in managing this money itself and not delegating that responsibility just to the political groups." German MEP Niclas Herbst, a member of the conservative Christian Democrats, who chairs the Parliament's committee on budgetary control, agrees. "This is taxpayers money and we want it back," he told journalists. He plans to push for criminal charges on this latest case at the European Public Prosecutor's Office (EPPO), to show that there must be accountability. Aiossa warns that unless the European Parliament seizes this moment to enact serious reforms, including transparency on allowances, competitive bidding for contracts and direct control over group budgets, public trust in the body will only continue to erode.
DW
2 hours ago
- DW
'One event' arms pause troubling for Ukraine – DW – 07/04/2025
The US says its pause on arms shipments is a one-off. But amid the turbulent US-Ukraine relationship, the assurance is little comfort to Volodymyr Zelenskyy or his European supporters. Ukraine's president Volodymyr Zelenskyy will seek "clarity" from Donald Trump on Friday amid a challenging week that saw a scheduled US arms shipment paused and Kyiv pummeled by another Russian drone strike. The US confirmed earlier this week that a batch of arms shipments to Ukraine would be paused in yet another reminder that the eastern European country's supply of advanced military equipment is not as secure as it once was. The US has downplayed this decision to withhold crucial arms shipments to Ukraine, as a state department spokesperson told reporters it was a one-off. "This is not a cessation of us assisting Ukraine or of providing weapons," said spokeswoman Tammy Bruce. "This is one event and one situation, and we'll discuss what else comes up in future." The US president has continued to press both sides of the conflict to negotiate a ceasefire and spoke with Russian leader Vladimir Putin on the matter on Thursday. But progress, according to Trump said, was limited. "I didn't make any progress with him today at all," he told reporters. "I'm not happy about that. I'm not happy… I don't think he's looking to stop." Russia followed that call with a massive drone strike on the Ukrainian capital. Zelenskyy is due to speak with Trump on Friday about the shipment pause. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video The pair have had a strained relationship during Trump's second term, publicly evidenced in a televised falling out during a White House sit-down in early March. Following the disastrous visit, Zelenskyy sought to shore up support closer to home with key European allies. Europe has since stepped up their support in financial and supply terms. But if the US were to continue to withhold support, it would significantly undermine Ukraine's position versus Russia. "If this were to be a longer-term issue, it would definitely be a challenge for Ukraine to cope," Jana Kobzova, a senior policy fellow specializing at the European Council on Foreign Relations, told DW. "Partly because some of the US systems are not easily replaceable, that goes especially for air defense, but also some of the longer-range capabilities which Ukraine has started to produce domestically but not in the quantities needed." Despite the spat between Trump and Zelenskyy, the pause on shipments could be as much about the US needing to weigh its own interests against the support it gives to dozens of other countries, including Israel. "After the Israel-Iranian exchange, I can imagine that Trump wants to relocate resources," Marina Miron, a defense researcher specializing in military technology and Russian capability at Kings College London, UK, told DW. Brent Sadler, a research fellow at the conservative think tank The Heritage Foundation, told Politico the move is likely a "due diligence" measure to ensure adequate resourcing for US forces elsewhere, including the Indo-Pacific in the event of a conflict outbreak in that region. Retired US Army General Ben Hodges, took a different view, saying the shipment pause was not about stockpiles. "It's a choice of this administration to placate Russia, at the expense of Ukraine," Hodges said. "It also shows the very limited understanding this administration [has] of the importance to America's strategic interests to help Ukraine and Europe deter Russia." Irrespective of the US' reasons for pausing its military shipments, the signals from the first months of the new administration suggest Europe's transatlantic ally is not the steadfast partner it once was. "There is a sober analysis both in Kyiv and the European part of NATO that relying on US military assistance to continue forever in Ukraine is not an option," said Kobzova. "And that has been there ever since March when the assistance was stopped for the first time." Among the American weapons due for shipping were Patriot air defense missiles and precision-guided artillery, according to officials speaking to newswires anonymously. The pause on these shipments comes at a critical time, with Russia ramping up weapons production and attacks. Those include strikes on soldier draft hubs in Poltava, the national capital Kyiv, the port city Odesa, and ground advances in key regions in Eastern Ukraine. Despite increased spending on defense from Europe's NATO members — now 5% of GDP following its June meeting — any long-term US stall on weapons will likely squeeze Ukraine and its neighbors. "There is recognition at the political level … that [Europe] would need to be increasing production, but none of that happens quickly enough for Ukraine," said Kobzova. Kobzova also pointed to investments being made into Ukraine's own defense industry to buffer against future supply-line cuts from the US. Europe is now the biggest investor in Ukraine's domestic defense industry. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video But even that might not be enough. Experts interviewed by DW highlighted the offer made by Zelenskyy to directly purchase armaments from the US, but in reality, arms manufacturing is a time-consuming process. "It takes two years to produce one [air defense missile] battery," the defense expert Miron told DW. "So even if you buy them now, it doesn't mean that they will be on the battlefield. You place a purchase order and you get in the queue." Finding a way to more effectively repair and adapt equipment for different missiles could be a potential stopgap to meet immediate needs. But, as defense supplies are again in doubt, Miron questioned whether Ukraine has what it needs to push back Russia's offensive. "The problem is time and money and we also have the variable of people," she said, adding that about 90 people are needed to operate a Patriot air missile battery. And Ukraine, Miron pointed out, is losing people, with no guarantee of replacement as the war grinds through its fourth year. Ukraine's support in Europe has been increasing — both rhetorically and materially. As it took over the presidency of the EU for the next six months, Denmark has seized the early opportunity to put Ukraine's membership application into the bloc back on the agenda. Danish Prime Minister Mette Frederiksen on Thursday said the EU "must strengthen Ukraine. And we must weaken Russia." "Ukraine is essential to Europe's security. Our contribution to Ukraine is also a protection of our freedom. Ukraine belongs in the European Union. It is in both in Denmark's and Europe's interest." Her comments come on the back of a visit to Ukraine from German Foreign Minister Johann Wadephul, who branded Ukraine's plight Berlin's most important foreign policy task. These statements from Europe might be more important than ever, as Miron says she is pessimistic about the future of the US-Ukraine relationship. "Certainly you can try some diplomacy, and explain to Trump that Ukraine matters, but I think Trump has already made up his mind," she said. "Trump has much more to solve with Russia in terms of global problems than with Ukraine."
