BRUSSELS: The European Union (EU) is willing to accept a trade arrangement with the United States that includes a 10% universal tariff on many of the bloc’s exports but wants the United States to commit to lower rates on key sectors such as pharmaceuticals, alcohol, semiconductors and commercial aircraft.
The EU is also pushing the United States for quotas and exemptions to effectively lower Washington’s 25% tariff on automobiles and car parts as well as its 50% tariff on steel and aluminum, according to people familiar with the matter.
The European Commission, which handles trade matters for the EU, views this arrangement as slightly favouring the United States but still something it could agree to, said the people, who spoke on the condition of anonymity.
The EU has until July 9 to clinch a trade arrangement with Donald Trump before tariffs on nearly all of the bloc’s exports to the United States jump to 50%.
The US President has imposed tariffs on almost all its trading partners, saying he wanted to bring back domestic manufacturing, needed to pay for a tax-cut extension and stop other countries from taking advantage of the United States.
A commission spokesperson didn’t immediately reply to a request for comment.
The S&P 500 quickly lost 12 points seconds after the report, before subsequently rebounding. The benchmark was on pace for its best quarter since December 2023.
In 2024, the EU exported €52.8bil worth of cars and car parts to the United States, it’s largest export destination, according to data compiled by the EU and analysts at ING Groep NV.
The bloc exported €24bil of steel and aluminium to the United States, led by Germany, Italy and France, data from the Vienna Institute for International Economic Studies showed.
The EU and the United States are increasingly confident that an interim agreement can be reached by July 9 to allow negotiations to continue beyond the deadline.
Any accord would also cover tariff and non-tariff barriers, purchases of key US goods and would outline additional areas for cooperation, according to the people.
The EU’s trade chief, Maros Sefcovic, will lead a delegation to Washington this week to try to move the talks forward, said the people.
The bloc continues to believe that an agreement in principle remains the best-case scenario, but officials have been unable to clarify for how long any such interim arrangements would last as negotiations continue.
The commission also wants to make sure that the current sectoral tariffs that the United States has in place, such as on cars and metals, as well as future tariffs Washington is planning, are addressed up front, two of the people said.
The EU is looking to address non-tariff barriers mostly through its simplification agenda and has proposed exploring strategic purchases in several areas, such as liquefied natural gas and artificial intelligence technologies.
The bloc is also open to working with the US on common economic security challenges.
The EU estimates that US duties now cover €380bil, or about 70%, of its exports to the United States.
The commission told member states yesterday that the bloc had received a proposal from the United States covering tariffs, non-tariff trade barriers and areas of strategic cooperation, said the people.
Specific details on the American offer, such as potential tariff rates, were not shared with member states, the people added.
Officials set out four potential scenarios ahead of next week’s deadline: a deal with an acceptable level of asymmetry, an unbalanced US offer that the EU could not accept, extending the deadline to allow negotiations to continue or Trump walks away from talks and hikes tariffs, said the people.
The last scenario would most likely see the EU retaliate with all its options, said the people. In parallel to the negotiations, the bloc continues to prepare countermeasures should the talks yield an unsatisfactory outcome. — Bloomberg
