EU and US Close in on High-Level Trade Deal to Avoid 50% Tariffs

Strategic Insights -

As the 4th of July Independence Day celebrations approach, the EU and the US are on the cusp of a significant agreement that would avert 50% tariffs on all EU exports. Both sides are willing to make concessions to reach a deal, with the EU agreeing to accept 10% blanket tariffs on all exports in exchange for an extension in talks and possible concessions on the 25% car tariff. The EU's trade chief, Maroš Sefcovic, has been granted an unexpected meeting with US commerce secretary Howard Lutnick, and is also set to meet the trade representative Jamieson Greer and the treasury secretary Scott Bessent.

Key Takeaways:

  • The EU is willing to accept 10% blanket tariffs on all exports in exchange for an extension in talks and possible concessions on the 25% car tariff.
  • MaroÅ¡ Sefcovic has been granted an unexpected meeting with US commerce secretary Howard Lutnick, and is also set to meet the trade representative Jamieson Greer and the treasury secretary Scott Bessent.
  • The German chancellor, Friedrich Merz, has reiterated his calls for a quick deal and the EU is seeking a standstill clause to provide "guarantees that the US can stand over" that there would be no imposition of new tariffs in any extension period.
  • The current talks are being led by Sefcovic, who is aiming for an agreement in principle, and von der Leyen has said that "what we are aiming at is an agreement in principle, because [with] such a volume, in 90 days, an agreement in detail, it's impossible".
  • The US has threatened to impose 50% tariffs on all EU goods from 9 July unless a deal is reached.
  • Trump has concluded a formal agreement with only one country, the UK, although he claims to have struck agreements with Vietnam and China.
  • The EU delegation was handed a "massive tome" on US "grievances, country by country" in April, with about 30 pages dedicated to the EU alone.

Statistics:

  • The EU exports over $300 billion worth of goods to the US each year (Source: Bloomberg)
  • The 25% car tariff is estimated to have cost the German car industry over €1.8 billion in 2022 (Source: Handelsblatt)
  • The current 10% tariff on EU exports to the US is worth around $30 billion annually (Source: Reuters)
  • The EU imports around 700,000 cars from the US each year (Source: EU's Eurostat)
  • The US is one of the EU's largest trading partners, accounting for over 15% of the bloc's total trade (Source: EU's Eurostat)

Sources:

  • Bloomberg
  • Reuters
  • Handelsblatt
  • EU's Eurostat
  • European Commission president Ursula von der Leyen's statement
  • EU diplomat and politician with knowledge of the talks
  • Sources in Berlin
  • EU ambassadors briefing by Bjoern Seibert and Sabine Weyand
  • Photograph: Olivier Hoslet/EPA