EU halts trade retaliation as Trump deal gains momentum

BRUSSELS (CN) — The European Union suspended planned retaliation against U.S. tariffs Wednesday “in good faith” and reported major progress in trade talks, as Brussels races to clinch a last-minute deal with Donald Trump before his revised Aug. 1 tariff deadline.

EU trade chief Maroš Šefčovič told the European Parliament that intense negotiations have “spared” the EU from the higher tariffs other nations face.

“We have made good progress on the text of the joint statement or agreement in principle, and I hope we can soon finalize our work,” Šefčovič said.

The EU’s restraint came as Danish Minister Marie Bjerre confirmed Brussels has “temporarily suspended” countermeasures targeting U.S. steel and aluminum tariffs, set to kick in automatically July 14, to avoid worsening “an already fragile and uncertain global economy.”

But patience is wearing thin.

“Our patience is not limitless,” Bjerre warned in the name of the new Danish presidencyof the EU Council, which shares co-legislative powers with the parliament. “If no agreement is reached by the stated deadline, the EU is prepared to activate targeted and proportionate countermeasures.”

Šefčovič described “four days of intense negotiations” last week with talks now continuing “remotely every single day.” Topics include tariffs, trade barriers, economic security and investment.

Still, he cautioned that “a certain degree of rebalancing will remain” — EU code for concessions.

The stakes couldn’t be higher. Trump’s tariffs threaten 502 billion euros ($547 billion) in EU exports to America — nearly 20% of the bloc’s total sales outside Europe, according to official Eurostat data.

Trump said Tuesday he’ll “probably” send the EU a tariff letter by Thursday. But Brussels expects no letter, the EU executive said Wednesday, highlighting continued confusion in the talks.

Two key sticking points remain

European Parliament trade chief Bernd Lange on Wednesday outlined the core disputes blocking agreement.

The EU wants “a significant reduction of tariffs until we have the final deal ready,” Lange told reporters in Strasbourg, France, home to the Parliament. “This is not permitted by the United States so far.”

Brussels also seeks a “standstill clause so that we have a, let’s say, final package and we are not forced with another tariff or whatever kind of measures,” Lange said. “This is also not given by the United States at the moment.”

Lange called current U.S. tariffs “illegal and unjustified” and criticized Trump’s negotiating approach as “really the speech of power and not the speech of partnership.”

The Parliament official said the EU had prepared a three-stage retaliation strategy targeting predetermined American products, metal scrap exports, and service sector measures — the same countermeasures that Brussels suspended Wednesday.

“The USA has practically only electric steel furnaces. They need that scrap,” Lange said of the potential European export restrictions that are now on hold.

German pressure intensifies

German Chancellor Friedrich Merz expressed confidence Wednesday that the EU can finalize a trade agreement with the U.S. quickly despite the impasse.

“I am cautiously optimistic that we can succeed in reaching an agreement with the U.S. in the next few days, by the end of the month at the latest,” Merz told lawmakers in the Bundestag, Germany’s federal parliament.

“There is a lot at stake here,” Merz said. “Jobs are at stake here. The prosperity of our country is also at stake here.”

The German chancellor faces intense pressure from domestic industry, particularly automakers suffering under current U.S. tariffs of 25% on cars and 50% on steel and aluminum.

EU automotive exports to the U.S. totaled 38.9 billion euros ($42.4 billion) in 2024, making it the largest destination for European car exports, according to data from the European Automobile Manufacturers’ Association.

Washington has proposed maintaining a 10% baseline tariff on all European goods while offering exemptions for sensitive sectors including aircraft and spirits, according to EU diplomatic sources.

The proposed framework would likely benefit France, Italy and Ireland through spirits and aircraft exemptions, but offers no relief for politically sensitive industries like cars, steel and aluminum.

Šefčovič emphasized that any agreement would serve as “a foundational framework that paves the way for future fully-fledged EU-U.S. trade agreements” rather than a final deal.

During a White House cabinet meeting Tuesday, Trump confirmed plans for 50% copper tariffs and said semiconductor and pharmaceutical duties would follow, with drug import levies of up to 200% potentially delayed a year.

Trump revenue surge fuels strategy

Treasury Secretary Scott Bessent reportedly said during Tuesday’s meeting that tariff collections have reached approximately $100 billion this year, with customs duties rising by $15 billion, or 286%, in May compared to the same month last year, according to the Congressional Budget Office’s Monthly Budget Review for May 2025.

Trump promised “a minimum of seven” additional tariff notices Wednesday morning, with more expected in the afternoon.

The administration pledged “90 deals in 90 days” after unveiling country-specific duties in April, but has completed only two agreements, with the U.K. and Vietnam.

Trump’s tariff strategy has created ripple effects across global supply chains, forcing companies to reconsider manufacturing locations and sourcing arrangements. European manufacturers have reported delays in investment decisions as they await clarity on the final tariff structure.

The automotive sector faces particular uncertainty, with German luxury carmakers like BMW and Mercedes-Benz potentially benefiting from proposed mechanisms that would credit U.S. production against EU imports. However, companies like Porsche, which imports all vehicles from Europe, would see no relief under current proposals.

The stakes for the automotive industry are substantial. The EU automotive sector employs 13.8 million people directly and indirectly, representing 6.1% of the bloc’s total employment and accounting for 8% of European manufacturing value added, according to the European Parliament’s research service.

Meanwhile, other trading partners are closely watching the EU-U.S. negotiations as a potential template for their own deals. Countries facing similar tariff threats see the European outcome as indicative of Trump’s willingness to compromise with major economic powers.

The EU has also accelerated efforts to diversify its trade relationships, pushing forward with agreements with Mercosur countries in South America and finalizing deals with Indonesia, while pursuing negotiations with India, the United Arab Emirates, the Philippines, Thailand and Malaysia to reduce dependence on the U.S. market. Brussels views trade diversification as essential for long-term economic resilience regardless of the current talks’ outcome.