The European Union (EU) has said it hopes to agree a US tariff deal “in the coming days” that would avoid import taxes US President Donald Trump has threatened on its goods.
Levies had been due to start on 9 July for goods entering the US from around the world, but Trump this week extended the timeline for talks until 1 August.
A deal with the EU – the US’s single biggest trading partner and a frequent target of Trump’s criticism – would mark a major milestone in relations between the two powers.
Despite the official confidence that an agreement can be reached, Italy’s Economy Minister Giancarlo Giorgetti said the talks are “very complicated” and could go right to the wire.
Other US trading partners are bracing for the possibility that Trump might move forward with his tariff plans, which were initially announced in April.
After the tariffs sparked turmoil in financial markets, Trump suspended the highest duties, while keeping in place a 10% tax on most goods.
On Monday, he sent letters to 14 of the US’s trading partners – including key strategic allies such as Japan and South Korea – warning them he would start collecting tariffs of between 25% and 40% on their exports starting 1 August.
On Wednesday, he posted additional letters on social media that outlined tariff plans for countries including the Philippines, Iraq and Moldova.
The White House in April had announced levies of 20% on European goods, which Trump later threatened to push to 50%.
Moving forward with those tariffs would carry some of the biggest risks for the US economy, given the importance of the trade relationship, noted analysts at Pantheon Macroeconomics.
The European Union has also said it is prepared to retaliate.
But EU spokesperson Olof Gill also said in a press conference on Wednesday that the outlines of a tariff agreement appeared close.
“We aim to reach a deal before [1 August], potentially even in the coming days,” he said.
Trump on Tuesday offered praise for the bloc and said the White House was “probably two days off” from setting a new tariff rate for the EU.
Commerce Secretary Howard Lutnick also told broadcaster CNBC that the bloc had made “significant, real offers” that would make it easier for American farmers to sell to the region.
Trump has separately threatened tariffs on other key items such as pharmaceuticals, announcing a 50% tariff on copper entering the US on Tuesday.
Despite the tariff back-and-forth, markets in Europe rose in early trading on Wednesday, while the UK and US opened flat.
Dan Coatsworth, analyst at AJ Bell, told the BBC he was “very surprised” to see the muted reaction, but said “maybe markets are shrugging it off”.
“It’s almost like Trump is losing credibility in terms of negotiating tactics… his bark is worse than his bite,” he said.
He added that investors have “gone from panic mode” following the ‘Liberation Day’ announcement of sweeping tariffs on 2 April to “wait and see mode”.
Some analysts describe investors’ reaction as ‘TACO’ (Trump always chickens out) trading as they question the credibility of Trump’s threats.
