EU Readies New Trade Proposal for US as Tariff Talks Move Slowly

(Bloomberg) --

The European Union is revising its proposals for a potential trade deal with the US as a first step toward opening serious negotiations, even as the Trump administration continues to provide little clarity and make demands that negotiators see as unrealistic, according to people familiar with the matter. 

The new EU proposal would provide more details on ways to lower trade and non-tariff barriers, as well as boost European investments within the US and purchases of US goods, including liquefied natural gas and semiconductors for use in artificial intelligence, said the people, who asked for anonymity to discuss sensitive talks.

Despite the slow progress in direct US-EU talks, European trade ministers said they see reasons for optimism that the US is open to negotiations after it reached temporary trade truces with the UK and China. 

“We are seeing some elements of optimism because we are seeing elements of de-escalation on the American side,” Michal Baranowski, undersecretary of state at the ministry of economic development and technology of Poland, said Thursday ahead of a meeting of trade ministers in Brussels. “Negotiations with the EU are speeding up.”

The US’s recent deal with the UK, however, leaves in a place a new baseline tariff of 10% and potentially sectoral duties, which may not be acceptable for many EU nations.

The Swedish minister for development cooperation and foreign trade, Benjamin Dousa, said that “if the UK-US deal is what Europe gets then the US can expect countermeasures from our side,” he said. “We will not be happy with that kind of deal.”

Maros Sefcovic, the EU commissioner for trade and economic security, told reporters he had another call with US Commerce Secretary Howard Lutnick on Wednesday, with further meetings between the two planned. 

The US has welcomed some of the options proposed by the bloc as part of a potential deal, but EU officials remain unclear about what exactly US President Donald Trump is looking for, according to people familiar with the matter. One potential stumbling block is Trump’s charge that the EU’s value-added tax is a non-tariff barrier, since EU officials are adamant it isn’t and that the bloc’s autonomy over tax and regulations isn’t negotiable.

EU officials are relieved so see signals that Trump may be willing to back away from the punitive tariffs he has threatened to impose on major trading partners if they make concessions to the US. That’s easing some of the economic concerns posed by the rapidly evolving US trade policy, fueling a rebound in markets that tumbled last month on mounting fears of a recession.

Still, the US has given no indication it’s willing to remove a baseline tariff and lift sectoral duties even if negotiations were to succeed. In parallel to negotiations, the EU is moving forward with countermeasures to hit back at Trump’s tariffs should talks fail to produce a satisfactory outcome.

Trump has continued to maintain a combative stance toward the EU, saying this week that it is “in many ways nastier than China,” and the trading bloc has been preparing to impose another round of counter-tariffs against the US if talks fail. The US has temporarily delayed some of its levies on the EU to allow for negotiations.

“Trade conflicts are harmful; they slow down the exchange of goods, they slow down economic growth, and in the end there are no winners,” German Economy Minister Katherina Reiche said ahead of the meeting, adding that she hopes a “reasonable solution” can be found. “We are negotiating from a position of economic power, which must be used carefully.”

The US and China agreed to temporarily lower tariffs on each other’s goods after progress in negotiations, significantly ratcheting down the trade tensions between the world’s two largest economies. That followed a pact between the US and the UK that Trump said he hoped would be the first of many, though the details of that agreement have yet to be fully worked out and the EU may demand deeper concessions. 

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