WASHINGTON/BRUSSELS – The United States is holding firm on its August 1 deadline to impose significantly higher tariffs on the European Union, a hardball negotiating tactic that has sent the bloc scrambling to secure a last-ditch trade deal while simultaneously preparing a massive arsenal of retaliatory measures.
With just over a week until a baseline 30% tariff is set to take effect, U.S. Commerce Secretary Howard Lutnick publicly confirmed the deadline is fixed, creating a high-stakes showdown between two of the world’s largest trading partners. The EU, which had hoped to secure a more favorable deal similar to the one reached with the United Kingdom, is now confronting the reality of a much tougher negotiation, with reports suggesting President Donald Trump is pushing for a minimum tariff of 15% to 20% in any potential agreement.
The standoff has prompted a significant shift in mood across Europe, with an increasing number of member states now signaling their support for deploying the bloc’s most powerful trade weapons if a deal cannot be reached.
“That’s a hard deadline, so on August 1, the new tariff rates will come in,” Lutnick said Sunday on CBS News. While he expressed confidence that a deal would eventually be struck, he made it clear that the clock was ticking. “Nothing stops countries from talking to us after August 1, but they’re going to start paying the tariffs on August 1,” he added.
The EU had hoped to negotiate a pact similar to the one the U.K. secured, which includes a 10% baseline tariff with some exceptions for key sectors. However, economists and analysts have become increasingly skeptical of Brussels’ ability to achieve such a framework, given President Trump’s frequent complaints about what he sees as an imbalanced trade relationship with the bloc.
Last Friday, the Financial Times reported that Trump was pushing for a minimum tariff of 15% to 20% on all EU imports and was happy to keep existing duties on the auto sector at 25%, a move that would be particularly damaging to car exporters in Germany.
Arnaud Girod, head of economics at Kepler Cheuvreux, told CNBC that a rate in that range “would be a total car crash for European exports.” He warned that such a move, on top of the recent strength of the euro, would be “very painful” for European companies and could also reignite inflation fears in the U.S.
Faced with this hardline stance, the EU is preparing for the worst. One EU official told CNBC there has been a clear shift in mood regarding the bloc’s potential response among all member states, with the notable exception of Hungary, whose leader, Viktor Orban, is a Trump ally.
The bloc’s potential countermeasures are substantial. It has prepared levies on U.S. imports worth €21 billion, which are currently on pause until August 6, and a second round of potential tariffs targeting trade worth €72 billion. These could affect a wide range of American goods, from clothing and agricultural products to food and drink items.
Furthermore, an increasing number of EU member states have signaled their support for deploying the bloc’s “anti-coercion instrument.” This is the EU’s most powerful trade tool, which would give the European Commission broad powers to take unilateral retaliatory action against the U.S.
Commerce Secretary Lutnick dismissed the possibility of the EU targeting iconic American products like Boeing airplanes and Kentucky bourbon, saying, “they’re just not going to do that.”
However, some analysts believe the EU’s more aggressive posture is a necessary negotiating tactic. Kepler Cheuvreux’s Girod said the bloc was “finally” flexing its muscles.
“They’ve been very, very, I would say, cool, with the U.S. so far, and now that we’re approaching the deadline, they have to sound a bit more aggressive,” Girod said, noting that failing to secure a better deal than the U.K. is “an issue for the EU, and they have to prove that the whole structure of the EU is helpful.”
