With the deadline set for August 1 approaching, American and European Union negotiators are scrambling to finalize terms on new trade tariffs. Clearly, both sides are feeling confident about finding middle ground. Indeed, US Treasury Secretary Scott Bessent just last week claimed that considerable ground has been covered in talks between US and EU officials.
The European Commission has already declared a deal on mutual recognition of trade tariffs “within reach.” At a press briefing in Brussels, European Commission spokesman Olof Gill only reinforced that sense. He reiterated that the EU was committed to achieving a negotiated outcome. “Right now the EU is focused on finding a negotiated outcome with the US,” he said.
Recently, President Donald Trump has sent a clear signal. Otherwise, like the Queen of Hearts, he will impose a sweeping 30% tariff on EU imports. He specifically said that was his red line in exchange for withdrawal of his threat. That decision is contingent upon the fact that the EU grants more access for American companies to the European market. “If they agree to open up the [European] Union to American businesses,” Trump remarked, the tariffs could be avoided.
Failure to come to a resolution by the 1 August deadline would result in automatic spending cuts, known as sequestration, that would have devastating economic impacts. If enacted, the proposed tariffs would fall mainly on imports that include Harley-Davidson motorcycles, chicken and denim. The potential fallout from these tariffs could place some sectors of French industry in “mortal danger,” according to industry experts.
Christine Lagarde, President of the European Central Bank (ECB), has weighed in on the urgency of resolving trade uncertainties. “The sooner this trade uncertainty is resolved… the less uncertainty we’ll have to deal with,” she stated. Her remarks eerily echo worries that above mentioned extended talks could do irreparable harm to the long-term economic health of both areas.
Here is what we know so far about the EU’s plan to respond to US tariffs. This first list, worth €21 billion, is a retaliation against the 25% tariffs that the US introduced last March on European steel and aluminum imports. If negotiations do indeed fall apart by the deadline, the EU has already drawn up a longer retaliatory measures list totaling €72 billion. Olof Gill warned, “These countermeasures will automatically click into force on 7 August should a negotiated outcome not happen before then.”
Bernard Arnault, chief executive of French luxury group LVMH, is in favour of friendly talks. He wants these conversations to mirror the positive deal struck between Japan and the US. He emphasized the importance of maintaining strong transatlantic trade relations, stating, “We cannot afford to fall out with the United States and engage in a trade war with our companies’ main market.”