EU Seeks UK-Style Trade Deal with US, Setting Stage for Further Tariff Negotiations

Strategic Insights -

As the June 9 deadline for negotiations on a US-EU trade deal approaches, the European Commission is considering a agreement similar to the one reached between the UK and the US, which will leave some tariffs in place. Michael Clauss, Europe adviser to German Chancellor Friedrich Merz, stated that instead of achieving a comprehensive trade agreement by July 9, the EU is expected to sign an arrangement "a little bit along the model of the US-UK [agreement]". The European Commission's initial goal was to establish a "landing zone" on Trump's 10 per cent "reciprocal tariffs" before moving forward with duties on specific sectors, Clauss said.

Key Takeaways:

  • The EU is considering a UK-style trade deal with the US, which would involve some tariffs remaining in place after the June 9 deadline.
  • Michael Clauss, Europe adviser to German Chancellor Friedrich Merz, stated that a UK-style deal is "doable" but it is too early to say if it will happen.
  • The EU had initially sought a comprehensive trade agreement, but is now exploring the possibility of a less ambitious arrangement.
  • The 27-member EU, led by the European Commission, is considering offering concessions to the US, such as buying more liquefied natural gas and weaponry, to reduce its €198bn annual trade surplus in goods with the US.
  • The EU's offer to buy more liquefied natural gas and weaponry is aimed at reducing the trade surplus and making the trade deal more manageable for the EU.
  • The US is no longer pressing demands that the EU abolish value-added tax, but is still seeking the end of national digital services taxes and the removal of "non-tariff barriers" such as quotas for locally made television programs and bans on certain US foods.

Statistics:

  • The EU's annual trade surplus in goods with the US is €198bn.
  • The US-EU trade deal is set to expire on July 9, 2023.
  • The EU is considering implementing reciprocal tariffs of 10 per cent, with lower tariff quotas in areas such as steel and cars.
  • A UK-style deal would involve some tariffs remaining in place, but the exact details are still unknown.
  • The US has threatened to impose 50 per cent reciprocal tariffs if no deal is reached by the June 9 deadline.

Sources:

  • The Financial Times
  • Europe adviser Michael Clauss
  • European Commission
  • The US commerce department
  • Sir Keir Starmer's government in London
  • Jamieson Greer, US trade representative
  • Howard Lutnick, US commerce secretary
  • Maros Sefcovic, EU trade commissioner