UK Deal Becomes Blueprint as EU Lowers Trade Ambitions

The recently implemented UK trade deal has emerged as a blueprint for the European Union, as it lowers its ambitions for a comprehensive agreement with the US and aims for a similar “framework deal” before President Trump’s July 9th tariff deadline. With only two days left for negotiations, the EU still faces the threat of 50% tariffs on its imports, and potentially 70% on others. This uncertainty has already caused businesses worldwide to halt investments, and the dollar to post its worst performance in 50 years. The EU’s internal debate revolves around whether to prioritize avoiding a trade war or resisting an “imbalanced” agreement.
US Treasury Secretary Scott Bessent confirmed that talks, which continued over the weekend, are focused on securing a range of agreements with important partners. The aggressive stance of the Trump administration, with Trump once labeling the EU “nastier than China,” has been a consistent feature of these talks. A recent illustration of this aggression was the threat of 17% tariffs on EU food imports made to Trade Commissioner Maroš Šefčovič during talks with senior US officials. So far, only the UK and Vietnam have secured deals.
The shift towards a framework agreement reflects the EU’s concession that a comprehensive trade deal is unattainable under the current circumstances. This approach would primarily extend talks while existing 10% baseline tariffs and other levies on cars, steel, and aluminum remain in place. European industries are bracing for increased costs, anticipating a minimum 10% tariff on exports to the US, a significant five-fold increase from the 2% average before Trump’s election last year.
While EU diplomats initially dismissed the UK deal as inadequate and potentially non-compliant with WTO rules, and had hoped their greater economic scale would secure a better outcome, they now recognize that a minimalist deal may be the most achievable outcome under the circumstances.