After Trump’s Ultimatum, EU Pushes For Preliminary Trade Deal With US, Including Non-Tariff Barriers

Even as President Donald Trump announced on Monday fresh tariffs for key trading partners that would take effect by Aug. 1, the European Union (EU) is reportedly striving to clinch a preliminary trade deal before the deadline.

A Bloomberg report, citing people familiar with the matter, said the deal envisaged by the 27-nation trading bloc would seek to firm up a 10% levy beyond the August deadline, allowing it more time to negotiate a permanent agreement.

Additionally, the EU seeks an exemption from the 10% base levy for key items, including aircraft, aircraft parts, as well as wine and spirits. These measures are reportedly part of the framework that is being discussed by the two sides.

U.S. stocks fell on Monday in response to President Trump's tariff-related announcements, despite having so far weathered the looming threat fairly well. The SPDR S&P 500 ETF (SPY), an exchange-traded fund that tracks the broader S&P 500 Index, is up 6.5% year-to-date compared to iShares Europe ETF’s (IEV) 23% rally.

The SPY ETF was the most active ticker on Stocktwits late Monday, with the sentiment toward the ETF ‘bullish,’ although worsening from the ‘extremely bullish’ stance a day ago.

Among the other concessions discussed are a reduction of the 25% tariffs imposed by the U.S. on auto and auto parts, as well as the 50% rate that applies to steel and aluminum. However, an immediate resolution to these levies is unlikely.

The U.S. and the EU are, however, discussing a middle-ground approach that would allow European companies manufacturing cars in the U.S. to export a certain number of units without any levy.

Meanwhile, the U.S. is reportedly mulling the introduction of tariffs for other sectors, such as pharmaceuticals and semiconductors.

The European Commission, the executive arm of the EU, briefed member states on Monday regarding the status of the negotiations, which are entrusted with matters such as trade. 

The report also stated that any preliminary deal may only apply in the near term and may not be legally binding. The U.S. and the EU are also reportedly negotiating non-tariff barriers, digital trade, and economic security.

Trump on Monday threatened to impose a 50% tariff on imports from the EU if its largest trading partner does not budge by the extended deadline. The EU, on the other hand, has approved tariffs on $24.6 billion worth of U.S. exports, which will begin to take effect when the latter’s metal levies come into effect. It has also prepared a list of tariffs on 95 billion euros ($115 billion) worth of U.S. products. 

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