United States: The European Union and the United States are reportedly close to finalizing a trade pact that would set mutual tariffs at 15%, following the pattern of the agreement President Donald Trump signed with Japan earlier this week.
According to sources familiar with the discussions, Brussels is leaning toward accepting the so-called reciprocal levies to avoid a steeper 30% tariff threatened by the US president if no deal is reached before August 1.
“The Japan agreement made the shakedown tactics crystal clear,” one EU diplomat remarked. “Most member states are reluctantly prepared to take this deal.”
What’s in the Proposed Deal?
Under the emerging framework:
- Both sides would waive tariffs on selected goods, including:
- Aircraft
- Medical devices
- Spirits
- The 15% tariff cap would include existing levies — such as the 10% hike imposed in April on EU exports to the US — effectively locking in the current rates rather than raising them further.
- Car tariffs, which had been lifted to 27.5% earlier this year under national security provisions, would be reduced to 15%, a significant win for European automakers.
Market Reaction and Ongoing Talks
Following the news:
- The euro recovered earlier losses to trade flat against the US dollar.
- US equities climbed, with the S&P 500 rising 0.6%.
- The European Commission, which manages trade policy for the bloc, briefed diplomats from EU countries on the latest developments after its meeting with US negotiators.
Though some view the deal as a tough compromise, it appears to have gained traction among EU members as the least damaging route forward.
Pressure from the US-Japan Pact
Two insiders noted that the US-Japan trade deal added urgency to the EU’s approach. Washington’s agreement with Tokyo cemented the 15% reciprocal tariff model, putting pressure on Brussels to follow suit or risk harsher penalties.
Brussels Preparing for All Scenarios
Despite moving toward a deal, the EU isn’t letting its guard down. If Trump decides to raise tariffs to 30%, the bloc is prepared to strike back:
- Officials are ready to unleash the Anti-Coercion Instrument (ACI) — a powerful but never-used measure that could:
- Ban US firms from public procurement contracts
- Revoke patents or intellectual property protections
- Limit imports and exports from the US
- Brussels is also preparing a €93 billion counter-tariff package, with rates as high as 30%, if the deal falls through by the August deadline.
A US official acknowledged that the situation remains “fluid and subject to change,” hinting that negotiations could still pivot before the clock runs out.
As the deadline looms, both sides appear eager to prevent a full-blown trade confrontation, though political tensions and economic stakes remain high.