With just 10 days left before a U.S. tariff freeze expires, the European Union is locked in a standoff over how to proceed in negotiations with Washington.
EU leaders met in Brussels on Thursday to decide whether to push for a fast-track trade agreement or hold their ground and risk a full-scale tariff war that could hit European exports from pharmaceuticals to automobiles.
European Commission President Ursula von der Leyen confirmed that the bloc had received a new U.S. proposal Thursday morning, described by one EU diplomat as a “two-pager, principle agreement” with no technical details.
“We are ready for a deal,” von der Leyen told reporters. “At the same time, we are preparing for the possibility that no satisfactory agreement is reached. In short, all options remain on the table.”
The EU remains divided, most visibly on strategy. German Chancellor Friedrich Merz, determined to shield his country’s carmakers, is pressing for “a quick and simple deal, not a slow and complicated one.”
French President Emmanuel Macron, while also backing a pragmatic approach, was quick to warn that “we won’t accept terms that are not balanced.” He added: “Our goodwill should not be seen as a weakness.”
Together with Italy’s Giorgia Meloni, both leaders pushed the issue to the top of the dinner agenda on Thursday night, amid fears that Trump could move forward with a sweeping 50% tariff on EU goods as early as July 9. The EU is already facing 50% tariffs on steel and aluminum, 25% on vehicles and parts, and a 10% general tariff on most other goods, a rate that could become permanent if no deal is reached.
Behind Berlin’s urgency is the fear that Brussels might settle for a flat 10% tariff across all sectors, ignoring the varying impact on key industries. “That’s not the mandate we gave the Commission,” one EU diplomat said, adding that Germany expects “targeted solutions for the most exposed sectors.”
Merz has warned that a one-size-fits-all approach would undermine Germany’s competitive edge in autos, semiconductors, pharmaceuticals, and steel. In recent weeks, Economy Minister Katharina Reiche proposed a mechanism allowing EU automakers to offset exports with cars built in their U.S. factories, such as those operated by BMW and Mercedes-Benz. But it remains unclear whether a quota-based carveout would be enough to shield German manufacturers from the most severe tariffs.
Christian Forwick, director-general for external economic policy at Germany’s Economy Ministry, said his country’s main concern is the unpredictability of U.S. trade measures.
“My concern would be more the uncertainty and the unpredictability of these tariffs,” Forwick said during an Aspen Institute panel in Berlin. “If we change these tariffs every few weeks, it’s not possible for companies doing business on the transatlantic market to plan.”
A 25% auto tariff, he warned, “would be the end of our trade relations.” EU officials fear that any final deal may end up heavily skewed in Washington’s favor. “If the deal gets too imbalanced, it will get a very bad reception by most of our national public opinions,” one official said.
Brussels insiders acknowledge that Washington’s offer includes only limited concessions tied to strict quotas, well below the zero-tariff outcome originally envisioned.
“Trump has used the highest U.S. tariffs since the Great Depression to force companies to bring production back to the U.S.,” one EU diplomat noted. The U.S. trade deficit with the EU reached $232 billion in 2025, accounting for roughly 19% of the total.
At the same time, EU officials are exploring long-term alternatives. One idea under discussion is a new trade cooperation framework with Asia-Pacific countries to offset the decline of the World Trade Organization.
“You all know that the WTO doesn’t work any more,” Merz said.
Another option being considered is a digital advertising tax aimed at U.S. tech giants such as Google, Meta, Apple, X and Microsoft. The measure would target the services surplus the U.S. runs with the EU.
For now, the EU has approved, but not yet enforced, tariffs on €21 billion of American goods, with a second package worth up to €95 billion still under debate.
Trump’s recent breakthrough with China further complicates Europe’s position. On Thursday, the U.S. president announced a formal agreement with Beijing following framework talks held in Geneva in May.
“We just signed with China yesterday,” Trump said during an unrelated White House event, without giving specifics. China later confirmed that both sides had finalized key elements of the deal.
According to Commerce Secretary Howard Lutnick, China has agreed to resume shipments of rare earths to the U.S. in exchange for a rollback of U.S. countermeasures. Lutnick said trade deals with 10 more U.S. partners are now “imminent.”
Treasury Secretary Scott Bessent predicted that “the balance of our most important trade talks” could be concluded by Labor Day.
The White House has signaled that it may extend the July 9 deadline for countries negotiating “in good faith.”
“I mean, you don’t blow up a deal that’s in process and making really good faith, sincere, authentic progress by dropping a tariff bomb in it,” said Stephen Miran, chair of the White House Council of Economic Advisers, in an interview with Yahoo Finance.
Yet officials also warned that Trump could soon start handing out final tariff rates unilaterally. Miran said the long-term U.S. average tariff level is unlikely to fall below 10%, though “some countries may negotiate more favorable duties while others will see a return of the steeper ‘Liberation Day’ tariffs.”
So far, the U.K. is the only country to have finalized a deal under Trump, locking in a 10% baseline with limited relief for car and steel exports. EU negotiators fear they may not be able to secure anything better.
“I still hope that a trade power like the EU, with 450 million people, has more leverage than the U.K.,” one senior diplomat said.
For now, EU leaders are racing against the clock—and against one another — to find common ground before the July 9 deadline resets the rules of transatlantic trade.
