The European Union and the United States are nearing the finalisation of a trade agreement that would impose 15% tariffs on most EU exports. The agreement aims to prevent a broader trade conflict but is expected to impact significant European industries. Diplomatic sources have confirmed that EU member states were briefed by the European Commission on Wednesday about the proposed deal, which would align with terms recently agreed between the US and Japan. While most goods are affected, exemptions are being considered for aircraft and medical devices.
In an effort to mitigate the terms, the EU has proposed reducing its average most-favoured-nation tariff rate of 4.8% to zero on specific products as part of an agreement in principle. However, this arrangement would still leave the EU at a disadvantage compared to the UK, which has secured a baseline tariff agreement of 10% with the US.
For the German car industry, the proposed 15% tariff would be a significant setback. Although it is lower than the current 27.5% rate, it remains substantially higher than the 2.75% duty that was in place before Donald Trump returned to the White House earlier this year. The agreement now awaits approval by President Trump, who has prioritised reshaping trade relationships in his second term. The White House has yet to confirm the deal, with spokesperson Kush Desai stating that “any discussion of trade deals is speculation unless announced by the president.”
As negotiations continue, Brussels is preparing a comprehensive package of countermeasures should Trump reject the agreement. On Wednesday, the European Commission threatened to impose €93 billion (£80 billion) in retaliatory tariffs on various US goods. This would combine products from an earlier €21 billion list, including poultry and spirits, with a newer €72 billion list targeting high-value items such as cars and Boeing aircraft.
If approved by EU member states in an upcoming vote, the counter-tariffs could be implemented as soon as 7 August. EU diplomats have also considered invoking the Anti-Coercion Instrument (ACI), a robust legal tool that could extend beyond tariffs and allow the bloc to ban certain US services, significantly affecting US tech firms operating in Europe. Only France has advocated for the immediate implementation of the ACI, arguing that the bloc must show its willingness to act decisively.
“The EU’s primary focus is on achieving a negotiated outcome with the US,” said Olof Gill, trade spokesperson for the European Commission. “But we are also preparing for all outcomes. To make countermeasures clearer, simpler and stronger, we will merge lists 1 and 2 into a single list.”
Some analysts believe the EU has already mishandled its negotiating position. Tobias Gehrke, senior policy fellow at the European Council on Foreign Relations, stated that the bloc failed to utilise its leverage after Trump issued his 30% tariff threat earlier this month. “There is a sense that the bloc has fumbled its hand, despite holding decent cards,” Gehrke said. “The EU should have immediately retaliated against US tariffs. While the mantra ‘negotiate from a position of strength’ was oft-repeated in speeches, any associated actions never materialised.”
A final agreement on tariffs is expected to be a key discussion point in Thursday’s summit with China, which will bring together European Commission president Ursula von der Leyen, EU Council president António Costa, and Chinese president Xi Jinping. With pressure mounting on both sides of the Atlantic, the coming days will be crucial in determining whether the EU and US can reach a compromise or escalate into a full-scale trade confrontation.
