The European Union is building a fallback. With time running out and nothing signed, officials in Brussels are now preparing for a no-deal situation.
The main issue is the August 1 deadline. If nothing changes, EU goods entering the U.S. could get slapped with a 30% tariff. That’s down from the 50% that Trump threatened earlier, but still a serious hit.
An EU diplomat allegedly told CNBC that a 15% base rate is now the expected outcome. That includes the current 4.8% duty already in place. But nothing is confirmed. “There could also be some exemptions that are still being worked out,” the diplomat said.
US-EU trade talks drag as August deadline approaches
Negotiations have been dragging. And it’s not going well. With less than a week left, both sides are stuck in limbo. The 30% tariff would kick in automatically if there’s no agreement. That would hit industries hard on both sides of the Atlantic.
Chief economist Holger Schmieding from Berenberg called a 15% rate the “positive outcome” compared to Trump’s past threats of 30% or 50%. But that’s still assuming there’s any deal at all. And right now, that’s up in the air.
“The final decision [is] in hands of President Trump,” one EU diplomat told CNBC. Another EU official wasn’t convinced either. They said reports suggesting a deal is close are just “too optimistic.” Their warning was: “Until President Trump speaks his mind we don’t have anything concrete. Everything still remains in the open.”
And the U.S. side isn’t giving any clarity either. When asked about the 15% scenario, White House Deputy Press Secretary Kush Desai waved it off. “Speculation,” he said, according to Reuters.
Trump’s unpredictability is the wildcard here. Earlier this week, during a meeting with Japan, a photo posted online by Dan Scavino showed scribbles and edits on Trump’s trade notes mid-discussion. That’s how fluid things are. One minute there’s a deal, the next minute there’s a rewrite … literally.
Despite that, European markets got a small boost on Thursday. Investors were hopeful, probably too hopeful, that something solid might come together. But nothing’s certain until Trump signs off. And no one knows if or when that’ll happen.
EU lines up retaliation if deal fails
While Washington drags its feet, Europe is drawing up its own playbook. If the U.S. does go ahead with tariffs next week, Brussels is ready to hit back—fast.
The plan? Retaliatory tariffs. The EU has combined multiple earlier target lists into one giant document. The value? €93 billion, or about $109.4 billion worth of American goods. Those countermeasures could take effect just days after the U.S. makes a move.
But that’s not the only tool in Europe’s arsenal, as officials are also considering triggering something called the Anti-Coercion Instrument, which has been described as the “nuclear option.” If they use it, U.S. suppliers could lose access to the EU market, meaning no more participation in public contracts across the bloc.
On top of that, Brussels could also restrict exports and imports and even limit foreign direct investment coming from American firms. So far, France is the only member state openly demanding immediate action, but that may change fast, seeing as the same EU diplomat reportedly told CNBC there’s already “a broad qualified majority voting for establishing coercion” if talks fall apart.
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