Countdown to Trade Showdown: Can the EU and US Avoid a Tariff Crisis?

As the 1 August deadline approaches, the European Union remains optimistic about reaching a trade deal with the US to avert President Donald Trump’s threatened 30% tariff on EU imports. Recent discussions suggest the US may have proposed a compromise with a 15% tariff on a broad range of European goods. However, White House representatives caution that any potential agreements are still speculative.

Trump’s demand for the EU to open up its market to American businesses is at the forefront of these negotiations. While progress seems promising, US Treasury Secretary Scott Bessent indicates that the discussions are ongoing.

The stakes are high, as French luxury group LVMH’s CEO, Bernard Arnault, emphasizes the importance of maintaining good relations with the US to prevent a trade war that could significantly impact European companies. The EU had originally aimed for a 10% baseline tariff similar to agreements with the UK, but escalating threats from the US have complicated these aspirations.

Currently, the EU has not retaliated against US tariffs, despite facing additional levies on its exports. However, should the negotiations fail by 1 August, the EU is prepared to impose countermeasures on US goods estimated at €93 billion (5 billion). This amount includes tariffs on products like Harley-Davidson motorcycles and poultry, and could escalate to new tariffs on bourbon, chemicals, and even cars.

The EU is also considering deploying its anti-coercion instrument (ACI), a robust measure intended to counteract unfair trade practices by non-EU countries. While there is minimal support for such drastic measures now, some EU officials have warned of the severe repercussions a 30% tariff could have on European industries, particularly in France. With both sides under pressure to negotiate, the emphasis remains on reaching a satisfactory resolution before the looming deadline.

Samuel wycliffe