Crunch Time for EU: Will They Avert a Trump Trade War?

The European Union is in a critical week, with only two days left to negotiate a trade deal with the US and avoid President Trump’s threatened 50% tariffs on its imports. Trump has warned of even higher import tax rates, up to 70%, on other countries. This looming threat has already sent shockwaves through the global economy, leading to a halt in business investments and the dollar’s weakest performance in 50 years. The EU is grappling with a fundamental question: should they secure a deal at all costs or take a firm stand if the terms are not favorable?
US Treasury Secretary Scott Bessent revealed that negotiations, ongoing even through the weekend, are focused on reaching 15 to 18 agreements with key partners. The aggressive posture from the Trump administration, with Trump once describing the EU as “nastier than China,” has been evident throughout the talks. A recent example saw EU Trade Commissioner Maroš Šefčovič threatened with 17% tariffs on food imports during discussions with senior US officials. The 90-day pause on “liberation day” tariffs, announced on April 2nd, expires this Wednesday, with only two deals, with the UK and Vietnam, secured so far.
The rapidly approaching July 9th deadline raises doubts about the EU’s ability to achieve more than a “political framework agreement” to extend talks, potentially leaving the existing 10% baseline tariff and other levies on cars, steel, and aluminum in place. Industries across Europe are bracing for increased costs, anticipating a minimum 10% tariff on exports to the US, a five-fold increase from the 2% average before Trump’s election last year. This pragmatic shift comes after the EU conceded that a comprehensive trade deal is now unattainable.
As a result, the EU is now aiming for an agreement in principle, a “framework deal,” akin to the one recently concluded with the UK. While EU diplomats initially dismissed the UK deal as thin and possibly legally dubious under WTO rules, hoping their significant economic clout (€1.6tn of transatlantic trade versus the UK’s €363bn) would secure a better outcome, they now acknowledge that a bare-bones deal might be the best they can achieve.