The EU expects trade relations with the US to remain difficult, even once a principle agreement is reached to resolve the tariff dispute between the two transatlantic partners, according to EU diplomats.
“We are working non-stop to find an initial agreement with the US – to keep tariffs as low as possible, and to provide the stability that businesses need,” Commission President Ursula von der Leyen said on Thursday, adding: “But we are also not naïve. We know the relationship with the US may not return to what it once was.”
The EU is awaiting a decision from US President Donald Trump, who has an EU-US trade agreement on his desk with a view to resolve the tariff dispute that has been ongoing since mid-March, according to remarks by his trade secretary Howard Lutnick in the US media.
The US currently imposes 50% tariffs on EU steel and aluminium, 25% on cars and 10% on all EU imports.
But though a framework agreement now appears within reach, that will only constitute a first step toward a more comprehensive trade deal, and what comes next is causing concern among Europeans.
On 14 July, EU trade ministers will meet to discuss the future of their relation with the US.
EU Member states will not be satisfied by the agreement
“Even if there’s a trade agreement, that would probably not be the end of it,” one EU diplomat said, “trade relations with the US have become fragile, unpredictable.”
Having long advocated a zero-rated tariff offer on all industrial goods from both sides of the Atlantic, the Commission has now settled on a baseline tariff rate of 10% on EU goods arriving in the US. Exemptions may apply to aircraft and spirits, but progress on negotiations on other strategic sectors—such as cars, aluminium, steel, and pharmaceuticals—remains faltering.
The EU diplomat said that member states will not be satisfied with the agreement in principle said now to be in reach.
“Most people expect a deal, but if there's a deal that doesn’t bring us to a better place from a European perspective than where we were before, we'll have increased tariffs, it will affect negatively trade between the EU and the US," he said.
Another EU diplomat predicted difficult negotiations among the 27 EU countries. Once the agreement in principle is approved, each country will take out its calculator to assess how its economy is affected, and what will need to be negotiated in a more comprehensive agreement to limit the negative impact on its trade.
In the short term, tensions could be high over whether the EU should implement the €21 billion retaliation list targeting US products, which has been suspended until July 14. Some countries, like Germany and Italy—highly exposed to trade with the US—favour a flexible, non-escalatory approach. Others, like France, want to show strength.
A second retaliation list is also reportedly ready. According to diplomats, the amount proposed by the Commission—€95 billion worth of US products—has been reduced. However, the Commission said that its implementation has not yet been determined.
