Can the EU negotiate a trade deal with the US?

EU targeted by US tariffs

Having run a persistent trade surplus in goods with the United States, the European Union has been one of the significant targets of US trade measures since Donald Trump’s return to the White House. The President has variously accused the EU of taking American leaders “for a ride” and of “ripping off the United States”.¹

The introduction of US Section 232 tariffs on global imports of steel, aluminium and automobiles has significantly impacted EU exports to the United States – affecting up to an estimated €26bn in steel and aluminium exports² and up to €39 billion in automobile exports.³ The EU is also subject to the 10% global baseline tariff on all goods imports to the US which came into force on 5 April. In addition, the EU was targeted with ‘reciprocal tariffs’ of 20% on all exports to the US – announced in the so-called ‘Liberation Day’ package on 2 April.

Table 1: US / EU tariff announcements since 1 January 2025

President Trump’s announcement, on 9 April, that he would pause for 90 days the introduction of ‘reciprocal’ tariffs on all trading partners except China was welcomed with a terse statement by the European Commission. Despite the stay of execution on a higher rate of reciprocal tariffs, all EU goods exports are still subject to a 10% baseline tariff, while the 25% tariffs on steel, aluminium and automobiles remain in place. EU leaders also know the EU remains a target of the US administration with the risk that the 20% reciprocal tariff resumes in mid-July if they can’t reach a trade deal with the US in the interim period. The EU is also wary of potential incoming S.232 tariffs on pharmaceuticals, which would hit one of the EU’s top goods exports to the US.

EU approach: seek to negotiate while developing potential countermeasures

The EU is developing a four-pronged approach in response to the US challenge. First, give negotiations a chance, taking advantage of the 90-day suspension of reciprocal tariffs to try and reach a deal while avoiding an unnecessary tit-for-tat. The visit of EU trade chief, Maros Sefcovic, to Washington in mid-April demonstrated the EU’s willingness to engage.

Second, the Commission is developing a range of potential countermeasures should talks with the US fail. The day after President Trump paused reciprocal tariffs, the EU announced it would pause its initial retaliatory measures – targeting US agricultural and industrial goods exports worth up to €26 bn – for a corresponding period of 90 days. However, the Commission is also working on additional goods countermeasures as well as signalling that it could escalate retaliation to encompass US services companies in the future.⁴

Third, EU leaders are seeking to strengthen trading relations with other countries around the world, with the Commission recently relaunching talks with Malaysia in January, seeking to accelerate existing negotiations with India, Indonesia and Thailand, and launching new FTA talks with the United Arab Emirates.

And fourth, the EU is seeking to protect the single market from dumping of cheap goods as a result of trade diversion, for example recently strengthening the steel safeguard measure to cut tariff-free imports.⁵

Talks remain in early stages

The EU has signalled for some time its willingness to negotiate both on tariffs and non-tariff barriers. However, the two parties are still in the early stages of scoping a potential agreement. The US has set a high bar on concessions it aims to obtain from the EU, which go far beyond tariff reductions (for example on VAT, Digital Services, and relaxation of regulations). Recent discussions in Washington focused on the EU offer of tariff elimination for industrial goods (‘zero-for-zero tariffs’), collaboration on addressing global overcapacity in the steel and aluminium sectors and collaboration on key supply chains such as pharmaceuticals and semiconductors (both sectors on which the US could still apply tariffs).

Talks partially covered non-tariff barriers but some of the US requests face strong opposition from the EU – in particular loosening standards on food health and safety and relaxing EU tech regulation. The EU is also ready to offer an increase in LNG purchases from the US through a system of demand aggregation.

At this stage, the Commission’s current working assumption is that it may not be able to negotiate away the 10% baseline tariff but may be able to make progress on reducing the ‘reciprocal’ tariff and eliminating some or all the sectoral tariffs. The next step is for the Commission, working closely with Member States, to draw up more formal proposals to put to the US side.

EU challenges: access to the White House and a united EU response

One of the key challenges the Commission faces is the lack of a direct channel of communication to the White House. Trade is exclusively the competence of the EU Commission, but the White House regards European institutions with suspicion, preferring instead to deal with individual member states. As such, the Commission is dealing with US Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer rather than Peter Navarro, Trump’s trade adviser.

A second key challenge is delivering unity in the EU’s response. Given the different levels of exposure to US goods tariffs experienced by individual member states, different attitudes to potential concessions are evident. This is also the case in discussions regarding broader retaliatory measures, in which Germany, Italy and Ireland – as the member states potentially most exposed – have expressed reservations about targeting US services. Therefore, the key task for the Commission in the next few weeks is coordinating the EU’s own negotiation mandate ahead of further talks with the US counterparts.

Conclusion

Recent comments by President Trump on negotiations with the EU – “there’ll be a trade deal, 100 per cent"⁶– have raised hopes that a deal could soon be concluded. However, EU policymakers are more cautious. A key milestone in the coming weeks will be the result of the investigations launched by President Trump on pharmaceuticals and semiconductors imports, which could lead to further tariffs and complicate the negotiations with the EU (in 2024, pharmaceuticals were the top US import from the EU). Meanwhile, engagement at a technical level between the two delegations is ongoing. While EU leaders remain confident of an eventual deal, the substance and timing remain uncertain at this stage.