US President Donald Trump is now shifting the focus of his trade talks to the European Union (EU) after reaching a framework agreement with Japan. Trump confirmed that the EU will join the talks soon, but did not provide further details. At the same time, the European Commission said that Trade Commissioner Maros Sefcovic is scheduled to hold talks with US Commerce Secretary Howard Lutnick on Wednesday in an effort to speed up a solution.
The August 1 deadline is approaching, and pressure on the EU to reach an agreement is increasing. If no agreement is reached, tariffs of up to 30% on EU imports to the US will come into effect, which could be met with retaliation from Brussels. For now, the first round of EU retaliatory tariffs on €21 billion worth of US goods is still on hold while additional measures are being prepared.
The success of the agreement between the US and Japan has raised positive sentiment among markets and analysts. According to Deutsche Bank, it has raised hopes that the EU will also have a chance to reach a similar agreement. In fact, Citi analysts have highlighted that the unlimited reduction in automotive tariffs in the Japan-US deal could be a key reference in negotiations with the EU and South Korea.
The EU is expected to propose strategic sectors for tariff exemptions or lower rates. This has been a long-standing priority in its trade talks. With vehicles among the EU’s top three exports to the US, any concessions in this sector are expected to have a major impact. In fact, European auto stocks jumped 3.5% on the news of the US-Japan deal.
Despite the focus on trade talks, geopolitical tensions are also a consideration. Experts expect the US to push the EU to take a tougher stance on China. Sefcovic also reportedly held a video call with Chinese Commerce Minister Wang Wentao. Meanwhile, the Presidents of the European Commission and the European Council are in Asia to meet Japanese leaders and attend an EU-China summit, making trade talks a top agenda item for the bloc.
