What happens if there is no EU customs deal with Trump?

July 9 is just around the corner. Tariffs of 50 percent on EU goods sold to the US could come into effect then, unless both sides reach an agreement beforehand. But how likely is that?

As the deadline approaches, there is uncertainty about what exactly will happen. US President Donald Trump said over the weekend that US trading partners, such as the EU, would either reach an agreement or be notified of new tariffs early this week.

After Trump had previously said that the new tariffs would take effect on July 9, Trump's Commerce Secretary Howard Lutnick said that the new tariffs would actually take effect on August 1, causing confusion over the timing.

US President Donald Trump imposed tariffs of 10 percent on EU goods on April 2. The rate was set at 25 percent for cars and even at 50 percent for steel and aluminum. Trump had threatened to increase the tax rate from 10 percent to 50 percent by April 9. However, the stock market crash triggered by his tariffs prevented this from happening.

Regardless of what happens on July 9, EU and US negotiators have been working to reach an agreement. However, there are doubts in European capitals that EU Trade Commissioner Maros Sefcovic will be able to reach an agreement that satisfies member states.

EU Commission President Ursula von der Leyen said at a press conference on Thursday (June 3) that it was "impossible" to reach a comprehensive trade agreement within 90 days, but she hoped for an "agreement in principle," citing the agreement between the United States and the United Kingdom as a model to strive for.

Different opinions in the EU member states

According to observers of the negotiations, there are major differences of opinion among EU member states about which concessions are acceptable and what the US side should offer. For example, German Chancellor Friedrich Merz has spoken of the need to reach an agreement quickly and criticized the European Commission's "complicated" approach.

"This is about the rapid resolution of a tariff dispute, especially for our country's key industries," he said.

French President Emmanuel Macron has described the idea of ​​tariffs imposed by powerful countries as "blackmail," without explicitly referring to Trump.

Jacob Funk Kirkegaard of the Peterson Institute for International Economics in the US capital Washington does not believe that the German Chancellor's position will be "acceptable" to all EU members.

"Merz has said several times that we can live with a general tariff of ten percent. As long as we don't get 25 percent sectoral tariffs on cars, etc.," he told DW.

While the statements by EU Trade Commissioner Sefcovic and von der Leyen towards Trump and the US sounded somewhat conciliatory, Kirkegaard sees them as an attempt to maintain unity among the member states.

"This is essentially the Commission's attempt to protect itself from attacks from member states, because it is obvious that they would have to bear the consequences of a trade war ," he said.

If the agreement with the United Kingdom is a model, the EU will likely have to live with 10 percent tariffs on many goods, as the United Kingdom has done. The US-UK agreement reduces the tariff on British cars from 25 percent to 10 percent, but the number of cars that can be imported at that rate is limited to 100,000. This is roughly equivalent to the number of cars the UK sold to the US in 2024.

Any cars exported in excess of this amount are subject to a tax of 27.5 percent. By comparison, the EU sold more than 700,000 cars to the US last year.

However, Kirkegaard believes that it will be difficult for many on the EU side to accept if the high tariffs on cars, steel and aluminum remain at the same level.

"As long as that's the case, I don't think there will be an agreement," he said. "For the EU, whose economy is roughly the same size as the US, it's ultimately unacceptable that US tariffs increase while the EU's do not."

Kirkegaard argues that in a trade confrontation between economies of the same size, tariffs should "rise together and fall together."

"Give Trump the win"

Bill Reinsch, a senior economic adviser at the Washington-based Center for Strategic and International Studies (CSIS), believes a British-style agreement is the most likely outcome. However, he believes that what matters most to Trump is the impression that he "won," not what was actually agreed upon.

"What matters to him is the meeting in the Oval Office, that they agreed on this and that, and now everything will be fine. So it wouldn't surprise me if there was an agreement in quotes with the EU at the end."

Reinsch believes it would be wise for the EU to focus on political results rather than on the perception of who won.

"Let him win. If you let him win, it doesn't matter what he wins. So you don't have to give up much if you approach it correctly.

Digital VAT

One area where there has been much speculation about possible EU concessions beyond tariffs is EU digital policy, particularly its Digital Services Act and possible digital VAT.

Germany has considered a 10 percent tax on US digital giants like Google and Meta's Facebook in Europe. Trump has opposed such plans, and Canada this week dropped a proposal for a digital services tax to keep trade talks with the US alive.

Reinsch believes that the EU should prevent its member states from introducing these taxes because "Trump is right" in his position and that is "not even rhetoric."

"I think they are clearly discriminating against some American companies," he said, adding that from a political point of view it was "completely the wrong approach."

"If you want to build European competitors, you don't do it by crushing the competition like this. You do it by building European competitors and creating viable options," Reinsch said.

No deal?

Given the uncertainty surrounding the July 9 deadline, the consequences of a failure of the negotiations are being seriously considered.

The EU has described the transatlantic trade relationship as "the most important trading relationship in the world," with bilateral trade in goods and services expected to reach €1.6 trillion ($1.88 trillion) in 2023, according to the EU Commission.

Kirkegaard says that a no-deal scenario could result in some EU countries needing fiscal stimulus due to "short-term volatility."

But he believes the EU can handle it. "We would not regress to the year (of the financial crisis, ed.) 2008 or face a situation even similar to the energy price shock following the Russian invasion in 2022—absolutely not," he said.

He expects the EU to "lose half a percentage point of growth" this year and next year, which is "not trivial" but at the same time "nothing we cannot live with."

Reinsch sees it differently: Failure would be "bad news" for everyone. "I think in terms of actual trade, it probably wouldn't be as consequential as an escalation with China , because we buy so much more from China. But if it's about disrupting relations with the EU and, above all, disrupting transatlantic investment flows, then it would be a major problem."

This article was adapted from English