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EU-US Trade Talks Focus On Tariff Cuts For Automakers (1)
Friday, 4 July 2025 23:48 WIB | ECONOMY |ECONOMIC

Several European Union automakers and capitals are pushing for a deal with President Donald Trump that would allow tariff relief in return for increased investment in the U.S., according to people familiar with the matter.

Member countries were briefed on the status of the trade talks on Friday after a series of talks in Washington this week and were told that a technical agreement in principle was close, the people said, speaking on condition of anonymity.

The EU has until July 9 to reach a trade deal with Trump before tariffs on nearly all of the bloc's exports to the U.S. jump to 50%. The U.S. president has imposed tariffs on nearly all of his trading partners, saying he wants to restore domestic manufacturing, need to pay for extended tax cuts and stop other countries from taking advantage of the U.S.

U.S. and EU officials will continue to negotiate over the weekend, the people said. A European Commission spokesman did not immediately respond to a request for comment. Any deal ultimately depends on Trump, and scenarios expected for next week include an agreement in principle that maintains the current truce with no new tariffs imposed; talks continue without a deal and suspended country-specific levies kick in; or the U.S. deems the EU has not met its requirements and announces more unilateral tariffs, the people said.

German Chancellor Friedrich Merz last month backed the idea of ​​a so-called offset rule that would provide tariff relief to European automakers that build cars in the U.S.

The Commission, which handles trade issues for the EU, has not endorsed an offset mechanism for autos, the people said. EU officials worry such a move would divert production and investment from Europe. Read More: EU Will Accept Trump's Universal Tariffs But Seeks Key Exemptions

The EU has indicated it is willing to accept an arrangement that includes a universal 10% tariff on many of its exports, but wants the U.S. to commit to lower tariffs than that on key sectors such as pharmaceuticals, alcohol, semiconductors and commercial aircraft, Bloomberg reported earlier.

The EU is also pressing the U.S. for quotas and exemptions to effectively roll back Washington's 25% tariffs on cars and auto parts and 50% tariffs on steel and aluminum.

The people cautioned that discussions remain difficult and member states have differing views on the level of imbalance they are prepared to accept in any deal.

Any initial agreement is likely to be short and not legally binding, the people said. The two sides also aim to reach agreement on non-tariff barriers, digital trade and economic security. Some capitals have said they want a quick deal and do not want to escalate tensions, while others want to negotiate from a position of strength by responding to Trump's levies with countermeasures.

The EU has been seeking an initial framework agreement with the U.S. that would allow for a two-step approach, covering non-tariff issues first and then the details of Trump's universal tariffs and other tariffs to be negotiated after the July 9 deadline, the people said.

The two sides have also discussed agricultural standards and tariffs, with the U.S. offering to raise tariffs to 17% from the original 20%, which would be above pre-Trump levels, one of the people said.

Talks on Trump's sectoral tariffs on autos and steel and aluminum have been particularly difficult and are not expected to be finalized next week, the people said.

On economic security, the two sides have sought common ground on screening incoming and outgoing foreign investment and export controls, the people said. The U.S. has also sought to include public procurement in any agreement. (alg)

Source: Bloomberg

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