US President Donald Trump has backed away — for now — from imposing steep levies on the European Union, two days after he threatened the bloc with 50 percent tariffs.
On Sunday, Trump agreed to extend his deadline for trade talks until July 9, from the June 1 deadline he set on Friday, after European Commission President Ursula von der Leyen said the bloc needed more time to “reach a good deal”.
Von der Leyen reportedly told Trump during a phone call that the EU needed more time to come to an agreement and asked him to delay the trade duties until July, the deadline he had originally set when he announced his “reciprocal” tariffs on almost all countries around the world in April.
Trump said that he had granted the request, and that von der Leyen told him, “We will rapidly get together to see if we can work something out.” Von der Leyen said in a social media post that the EU was ready to move quickly in trade talks.
During a trip to Vietnam on Monday, French President Emmanuel Macron said that he hoped Washington and Brussels could achieve a deal with the lowest tariffs possible. “The discussions are advancing,” he told reporters.
The US president’s latest salvo comes amid Washington’s stop-and-start global trade war that kicked off in April. Trump’s moves have unnerved markets, businesses and consumers and raised fears of a global economic downturn.
But while his approach has yielded a trade deal with the United Kingdom, and negotiations are believed to be progressing with a range of other nations — from India to Vietnam to Japan — key sticking points complicate the prospects of an agreement with the EU.
Here’s what the tiff is about, and why the US and EU are struggling to reach a trade deal:
What’s the backdrop?
Trump’s recent broadside against the EU was prompted by the White House’s belief that negotiations with the bloc are not progressing fast enough. “Our discussions with them are going nowhere!” Trump posted on Truth Social.
“Therefore, I am recommending a straight 50% Tariff on the European Union, starting on June 1, 2025. There is no Tariff if the product is built or manufactured in the United States,” he wrote last Friday.
By Sunday, however, Trump had changed course. He welcomed von der Leyen’s assertion that the bloc was willing to negotiate but that it needed more time. He added that it was his “privilege” to delay the increased tariffs.
Trump said, “[von der Leyen] said she wants to get down to serious negotiation. We had a very nice call … she said we will rapidly get together and see if we can work something out,” he told reporters.
Trump is thought to be opposed to the idea of mutually cutting tariffs to zero – an EU proposal. The US president has insisted on preserving a baseline 10 percent tax on most imports from America’s trading partners.
On May 8, the UK agreed to a trade deal that kept Trump’s 10 percent reciprocal tariff rate in place.
EU trade chief Maros Sefcovic said the European Commission – the EU’s executive arm – remains committed to securing a deal that works for both sides. But he warned that EU-US trade “must be guided by mutual respect, not threats.”
In 2024, EU exports to the US totalled about 532 billion euros ($603bn). Pharmaceuticals, cars and auto parts, chemicals and aircraft were among the largest exports, according to EU data.
What is the EU offering?
Last week, the US rejected a proposal sent by the European Commission. The EU had offered to remove tariffs on industrial goods, boost access for some US agricultural products and co-develop AI data centres, Bloomberg reported.
It also proposed enhancing economic cooperation in areas like shipbuilding and port infrastructure, as well as by establishing an EU-US energy partnership covering gas, nuclear power and oil.
In exchange, Brussels wants the Trump administration to have more flexibility on lowering the 10 percent baseline tariff — including by potentially lowering it in phases over time.
While the EU has said it wants to find a negotiated solution, it has also been preparing to retaliate if necessary.
Member states have approved a 50 percent tariff on a batch of US products worth 21 billion euros ($23.8bn), including maize, wheat and clothing, which will kick in on July 14 without a deal.
The bloc is also preparing tariffs on other imported products totalling 95 billion euros ($107.8bn), targeting industrial goods like Boeing aircraft and cars, as well as bourbon.
What does the US want?
Trump has long accused the European Union of “ripping off” the US, and is determined that Brussels will adopt measures to lower its 198.2-billion-euro ($225bn) goods trade surplus with the US.
Washington has repeatedly raised concerns over Europe’s value-added tax, as well as its regulations on IT and food exports. Trump contends that these controls act as de facto trade barriers to the EU.
For his part, Sefcovic recently told the Financial Times that he wants to slash the US-EU trade deficit by buying more US gas, weapons and agricultural products.
In addition, the bloc is reportedly open to reducing its dependence on Chinese exports and on erecting tariffs against subsidised Chinese exports, which Trump is keen on.
Sefcovic and his US counterpart, Jamieson Greer, are scheduled to meet in Paris next month to discuss ways of de-escalating the ongoing US-EU trade dispute.
How badly would Trump’s tariffs affect both economies?
In 2024, the EU exported 531.6 billion euros ($603bn) in goods to the US and imported products worth 333 billion euros ($377.8bn), resulting in a trade surplus of almost 200 billion euros ($227bn).
On the flip side, the US runs a surplus of more than 109 billion euros ($124bn) in services as of 2023, with notable IT exports, led by large American tech companies, charges for intellectual property and financial services.
Trump’s tariffs would, in turn, hit both economies hard. According to a 2019 study by the International Monetary Fund, a full-scale US-EU trade war could cost 0.3-to-0.6 percent of gross domestic product (GDP) on both sides.