The real cost of the US-EU trade impasse is highlighted by the anticipated jump from a 2% average tariff on EU exports to a minimum of 10% under Trump’s presidency, as the July 9th deadline looms. With only two days left to secure a deal, the European Union faces the immediate threat of 50% tariffs on its imports, and potentially 70% on others, should an agreement not be reached. This economic uncertainty has already led to paused business investments globally and the dollar’s weakest performance in 50 years. The EU is in a critical internal debate: a deal at any cost, or holding out for a better agreement.
US Treasury Secretary Scott Bessent confirmed that talks, which continued over the weekend, are focused on securing a range of agreements with important partners. The aggressive stance of the Trump administration, with Trump once labeling the EU “nastier than China,” has been a consistent feature of these talks. A recent illustration of this aggression was the threat of 17% tariffs on EU food imports made to Trade Commissioner Maroš Šefčovič during talks with senior US officials. So far, only the UK and Vietnam have secured deals.
The EU has conceded that a comprehensive trade deal is unattainable, shifting its focus to an agreement in principle, or a “framework deal,” similar to the UK’s recently implemented agreement. This revised expectation stems from the ticking clock and the need to mitigate the economic impact of potential tariffs. The 10% baseline tariff and other levies on cars, steel, and aluminum are expected to remain in place even with a framework deal.
While EU diplomats initially dismissed the UK deal as inadequate and potentially non-compliant with WTO rules, and had hoped their greater economic scale would secure a better outcome, they now recognize that a minimalist deal may be the most achievable outcome under the circumstances.