US–EU near trade deal, but tariff rift remains: Details here

The United States and the European Union are close to finalising a deal that addresses a raft of long-standing non-tariff trade frictions, including climate regulations, digital market rules, and supply chain concerns.

However, key tariff-related issues, including those threatened or imposed under President Donald Trump remain unresolved ahead of a critical July deadline.

The developments were first reported by Bloomberg, citing a draft agreement circulated by the Office of the US Trade Representative (USTR).

What’s in the draft deal?

According to Bloomberg, the draft “agreement on reciprocal trade” outlines tentative compromises on multiple regulatory fronts. The EU has agreed to delay enforcement of its new deforestation regulation for one year, giving global companies more time to comply.

The policy requires importers to prove their products are not linked to deforestation, a regulation that has faced resistance from US exporters and European businesses alike. The delay had already been internally decided by the EU last year but now forms part of the broader trade dialogue.

The draft also includes provisions to pause enforcement of the EU’s Digital Markets Act (DMA) on major American tech platforms while structured negotiations are ongoing. The DMA, one of the EU’s flagship digital competition laws, has already resulted in hefty fines for US firms such as Apple and Meta.

The exemption would ease transatlantic tensions over what Washington has called discriminatory enforcement.

Another key clause in the draft agreement offers US products a one-year exemption from the EU’s Carbon Border Adjustment Mechanism (CBAM), a climate tariff designed to reflect the carbon intensity of imports. This exemption would give US exporters temporary relief from one of Europe’s most contentious climate policies.

The agreement further proposes exemptions for US energy exports from upcoming EU methane rules and suggests that both parties coordinate their policies on shipbuilding and maritime shipping. Specifically, the EU would consider adopting measures similar to US penalties targeting non-market economies, particularly China.

The draft text also encourages joint efforts on defence procurement and critical minerals, highlighting a shared commitment to reduce dependency on Chinese supply chains. As reported by Bloomberg, the overall aim is to streamline transatlantic coordination on strategic industries.

Tariff tensions still unresolved

Despite progress on regulatory matters, the draft agreement reportedly omits any resolution of US–EU tariff disputes.

As per Bloomberg, it does not mention the 20 per cent reciprocal tariff that President Trump threatened and temporarily paused in April nor does it address ongoing duties on EU steel, aluminium, and automotive exports.

Likewise, the agreement does not include a response to the EU’s planned retaliatory tariffs, scheduled to take effect on 14 July if no deal is reached.

While negotiations continue, it remains unclear whether tariff issues are being handled in a parallel track or have stalled.

According to Bloomberg, US Trade Representative Jamieson Greer earlier described the EU’s initial proposal which included offers to buy more US goods like liquefied natural gas as a “credible starting point.” However, the most recent draft agreement appears focused solely on non-tariff barriers.

European officials have told Bloomberg that any deal perceived as offering one-sided concessions to the US would face public and political resistance.

Some have also signalled that maintaining Trump’s baseline 10 per cent tariffs could be a red line, though expectations are growing that these tariffs may not be removed under any circumstances, given Trump’s public defence of tariff revenue as a national economic tool.

Why it matters?

The agreement, if finalised, would mark a significant step toward easing transatlantic trade tensions in non-tariff areas that have burdened US exporters, especially in technology and energy.

It also reflects growing alignment on environmental and industrial policy in response to Chinese trade practices.

However, the absence of a tariff breakthrough underscores the deep political and economic divide that still defines US–EU trade relations.

As quoted by Bloomberg, an EU spokesperson confirmed that both sides remain “fully and deeply engaged in negotiations,” but stopped short of confirming agreement on the full text.

With President Trump’s 9 July tariff deadline approaching and the EU’s retaliatory measures due shortly after, the clock is ticking for a comprehensive settlement that addresses both regulatory and tariff concerns.

(With inputs from the agencies)