Why are the US and EU struggling to achieve a commerce deal?

US President Donald Trump has backed away — for now — from imposing steep levies on the European Union, two days after he threatened the bloc with 50 % tariffs.

On Sunday, Trump agreed to increase his deadline for commerce talks till July 9, from the June 1 deadline he set on Friday, after European Fee President Ursula von der Leyen stated the bloc wanted extra time to “attain a superb deal”.

Von der Leyen reportedly instructed Trump throughout a cellphone name that the EU wanted extra time to return to an settlement and requested him to delay the commerce duties till July, the deadline he had initially set when he introduced his “reciprocal” tariffs on virtually all nations all over the world in April.

Trump stated that he had granted the request, and that von der Leyen instructed him, “We’ll quickly get collectively to see if we are able to work one thing out.” Von der Leyen stated in a social media submit that the EU was prepared to maneuver rapidly in commerce talks.

Throughout a visit to Vietnam on Monday, French President Emmanuel Macron stated that he hoped Washington and Brussels may obtain a take care of the bottom tariffs potential. “The discussions are advancing,” he instructed reporters.

The US president’s newest salvo comes amid Washington’s stop-and-start world commerce struggle that kicked off in April. Trump’s strikes have unnerved markets, companies and customers and raised fears of a worldwide financial downturn.

However whereas his method has yielded a commerce take care of the UK, and negotiations are believed to be progressing with a spread of different nations — from India to Vietnam to Japan — key sticking factors complicate the prospects of an settlement with the EU.

Right here’s what the tiff is about, and why the US and EU are struggling to achieve a commerce deal:

What’s the backdrop?

Trump’s current broadside towards the EU was prompted by the White Home’s perception that negotiations with the bloc usually are not progressing quick sufficient. “Our discussions with them are going nowhere!” Trump posted on Reality Social.

“Subsequently, I’m recommending a straight 50% Tariff on the European Union, beginning on June 1, 2025. There is no such thing as a Tariff if the product is constructed or manufactured in the USA,” he wrote final Friday.

By Sunday, nevertheless, Trump had modified course. He welcomed von der Leyen’s assertion that the bloc was prepared to barter however that it wanted extra time. He added that it was his “privilege” to delay the elevated tariffs.

Trump stated, “[von der Leyen] stated she desires to get all the way down to critical negotiation. We had a really good name … she stated we’ll quickly get collectively and see if we are able to work one thing out,” he instructed reporters.

Trump is regarded as against the concept of mutually chopping tariffs to zero – an EU proposal. The US president has insisted on preserving a baseline 10 % tax on most imports from America’s buying and selling companions.

On Might 8, the UK agreed to a commerce deal that stored Trump’s 10 % reciprocal tariff price in place.

EU commerce chief Maros Sefcovic stated the European Fee – the EU’s government arm – stays dedicated to securing a deal that works for either side. However he warned that EU-US commerce “should be guided by mutual respect, not threats.”

In 2024, EU exports to the US totalled about 532 billion euros ($603bn). Prescription drugs, automobiles and auto components, chemical substances and plane had been among the many largest exports, in accordance with EU information.

What’s the EU providing?

Final week, the US rejected a proposal despatched by the European Fee. The EU had provided to take away tariffs on industrial items, enhance entry for some US agricultural merchandise and co-develop AI information centres, Bloomberg reported.

It additionally proposed enhancing financial cooperation in areas like shipbuilding and port infrastructure, in addition to by establishing an EU-US vitality partnership protecting gasoline, nuclear energy and oil.

In change, Brussels desires the Trump administration to have extra flexibility on decreasing the ten % baseline tariff — together with by probably decreasing it in phases over time.

Whereas the EU has stated it desires to discover a negotiated resolution, it has additionally been getting ready to retaliate if mandatory.

Member states have authorised a 50 % tariff on a batch of US merchandise value 21 billion euros ($23.8bn), together with maize, wheat and clothes, which can kick in on July 14 with out a deal.

The bloc can be getting ready tariffs on different imported merchandise totalling 95 billion euros ($107.8bn), focusing on industrial items like Boeing plane and automobiles, in addition to bourbon.

What does the US need?

Trump has lengthy accused the European Union of “ripping off” the US, and is set that Brussels will undertake measures to decrease its 198.2-billion-euro ($225bn) items commerce surplus with the US.

Washington has repeatedly raised issues over Europe’s value-added tax, in addition to its rules on IT and meals exports. Trump contends that these controls act as de facto commerce obstacles to the EU.

For his half, Sefcovic not too long ago instructed the Monetary Instances that he desires to slash the US-EU commerce deficit by shopping for extra US gasoline, weapons and agricultural merchandise.

As well as, the bloc is reportedly open to lowering its dependence on Chinese language exports and on erecting tariffs towards subsidised Chinese language exports, which Trump is eager on.

Sefcovic and his US counterpart, Jamieson Greer, are scheduled to satisfy in Paris subsequent month to debate methods of de-escalating the continued US-EU commerce dispute.

How badly would Trump’s tariffs have an effect on each economies?

In 2024, the EU exported 531.6 billion euros ($603bn) in items to the US and imported merchandise value 333 billion euros ($377.8bn), leading to a commerce surplus of virtually 200 billion euros ($227bn).

On the flip aspect, the US runs a surplus of greater than 109 billion euros ($124bn) in providers as of 2023, with notable IT exports, led by giant American tech firms, fees for mental property and monetary providers.

Trump’s tariffs would, in flip, hit each economies onerous. In keeping with a 2019 research by the Worldwide Financial Fund, a full-scale US-EU commerce struggle may price 0.3-to-0.6 % of gross home product (GDP) on either side.