EU increasingly resigned to 10% baseline tariff in US trade talks, European sources say

Fashion Network

4 hours ago

European officials are increasingly resigned to a 10% rate on "reciprocal" tariffs, which are the baseline in any trade deal between the United States and the European Union, five sources familiar with the negotiations said.
President Donald Trump has imposed broad tariffs on U.S. trade partners in an effort to reduce the trade deficit in goods with the EU. U.S. Commerce Secretary Howard Lutnick has ruled out going below a 10% baseline rate for the so-called reciprocal tariffs that cover most goods the EU exports to the U.S.
European sources, who spoke on condition of anonymity because of the sensitivity of the talks, said EU negotiators are still pressing for the rate to be lower than 10%.
However, one of the sources, an EU official, said negotiating the level down had become harder since the U.S. started drawing revenues from its global tariffs. "The 10% rate has become a sticking point. We are applying pressure, but now they're collecting revenue," said the official.
A second European source said the EU had not accepted 10% as the baseline rate at talks but acknowledged that it would be difficult to change or abolish that baseline.
A spokesperson for the European Commission, the EU's executive body that negotiates trade deals for the 27-nation bloc, did not respond to a Reuters request for comment. The U.S. government also did not immediately comment.
The EU has publicly said it will not settle for a double-digit baseline rate—as did Britain, which agreed to a limited trade deal in May that retains 10% tariffs on British exports while cutting higher rates for steel and cars.
Trump has hit Europe with a 50% tariff on steel and aluminum, and a 25% levy on cars. The EU is trying to secure a deal before July 9, when reciprocal tariffs on most other goods could rise from 10% to up to 50%.
With an annual trade surplus of $236 billion with the U.S. in 2024, the EU has more to lose from tariffs than non-EU member Britain, which runs a trade deficit with the U.S.
Trump, who has said he plans to use tariff revenues to fund his sweeping tax cuts and spending package, stated on Tuesday that the EU was not offering a fair deal.
Washington has sought to fold non-tariff barriers—such as digital services taxes, corporate sustainability reporting rules, LNG sales, and food standards—into the talks.
The U.S. posted a $258 billion budget surplus for April, up 23% from a year earlier, and the Treasury Department said net customs duties in April more than doubled compared to the same period last year.
Tariff impact
Since early April, the sweeping tariffs imposed by Trump and the subsequent pauses on some of them have generated upheaval for companies worldwide, causing some to withdraw or refrain from giving financial guidance.
European automakers have been hit hard. Mercedes pulled its earnings guidance, Stellantis suspended its guidance and Volvo Cars withdrew its earnings forecasts for the next two years.
One European car executive said premium carmakers could stomach a 10% tariff but that it would be much tougher for a mass-market producer.
The U.S. imposed tariffs on steel, aluminum, cars, and car parts on national security grounds. Ongoing investigations into pharmaceuticals, semiconductors, timber, and trucks could trigger further duties, which EU officials say they will not accept.
Trump said on Tuesday that pharma tariffs were "coming very soon."
A pharma industry source said the European Commission was resisting sector-specific tariffs. The Commission has told the pharma industry that while it does not want the 10% baseline reciprocal tariffs, accepting a 10% base tariff may provide leverage in those negotiations, the source said.
A European beverage industry source said the wine and spirits sector would rather have a deal at 10% than protracted negotiations.
"Whether it's 0% or 10%, if applied both ways, it's manageable. It won't kill business," said Rob van Gils, CEO of Austrian company Hammerer Aluminium Industries. "Not securing a deal would have a huge negative impact on our market."
One EU official said a 10% baseline rate would "not massively erode competitive positions, especially if others receive the same treatment."
Based in Brussels, France Industries represents France's biggest companies, including L'Oréal and Airbus. The group said tariffs should not be viewed in isolation.
"It's an additional burden on top of rising energy prices, inflation, regulatory pressure and global overcapacity," said its head, Alexandre Saubot.