MNI: EU Split On Whether To Accept Flawed US Deal By Deadline

European leaders are split on whether to accept a "quick and simple" trade deal with the U.S. by the July 9 deadline before threatened higher tariffs or hold out for a more balanced and reciprocal agreement, officials told MNI following Thursday's Brussels summit discussions.

The disagreements followed a debrief by European Commission President Ursula von der Leyen on the latest U.S. trade offer at the meeting, which made plain its inadequacies from an EU point of view.

Some leaders argued in favour of accepting an “uneven” or "asymmetric" deal now, while maybe seeking a later review of terms or resorting to WTO procedures to address remaining grievances, arguing that a temporary if imperfect immediate deal might pre-empt a bigger trade conflict and provide welcome political breathing space.

German Chancellor Friedrich Merz was among the latter, backing a quick and simple deal, and citing the intense competitive pressures faced by his country's chemicals, pharma, steel, and auto sectors. In contrast, French President Emmanuel Macron pushed for negotiations to continue.

Other leaders warned of the dangers of accepting a deal based on the latest U.S. offer, which they argued threatens EU goals for strategic autonomy as well as smaller companies and agriculture if U.S. goods enjoy a subsidy-fuelled commercial advantage.

RETALIATE OR NOT

EU leaders are also split over whether to retaliate if talks break down or if the deal proves too one-sided. While some favour a firm approach, others advise avoiding provocation while talks continue. (See MNI: China Advisors - EU Talks Hinge On Europe Deal With U.S.)

The latest U.S. offer proposes lower or more broadly applied EU tariffs on U.S. imports, especially agricultural and energy goods, regulatory alignments and simplified market access for U.S. companies, as well as larger EU purchases of U.S. goods such as LNG and pharmaceuticals.

In return, the U.S. would provide only limited tariff relief. The sense among EU officials is that it is increasingly likely that the bloc will have to live with a 10% baseline tariff. The U.S. offer also proposes specific exemptions or quotas for sensitive sectors, including autos, capital goods and pharma and no significant change in “Buy American” provisions or subsidies.

Officials reported scepticism among leaders over the proposal by von der Leyen for EU entry into the Trans-Pacific Partnership and the creation of a new WTO-style rules-based trade regime, with some noting that the establishment of the WTO during the Uruguay Round had taken years.