These Are The Sticking Points Holding Up A U.S.-EU Trade Deal

The U.S. and European Union are running out of time to strike a deal on trade tariffs — and analysts say several key sticking points could make an agreement impossible.

Negotiations have been slow since both the U.S. and EU temporarily cut duties on each other until July 9. If a deal is not agreed by then, full reciprocal import tariffs of 50% on EU goods, and the bloc's wide-spanning countermeasures are set to come into effect.

"We're talking, but I don't feel that they're offering a fair deal yet," U.S. President Donald Trump told reporters Tuesday, further dashing hopes of an imminent agreement.

So what's holding things up between the two sides, which had a relationship worth 1.68 trillion euros ($1.93 trillion) in 2024?

Big tech regulation

One bone of contention flagged by experts was the EU's regulation of especially Big Tech companies. The bloc has faced regular criticism from the U.S. after imposing landmark rules on tech giants regarding transparency, competition and moderation.

"Trump's administration actively seeks to use trade negotiations to force the EU to capitulate and weaken the regulatory environment," Alberto Rizzi, policy fellow at the European Council on Foreign Relations, told CNBC.

"However, to Europeans any interference into its domestic regulation of digital platforms is not acceptable and would run counter to its commitment to fight disinformation and hate speech," he added.

Philip Luck, director of the economics program at the Center for Strategic and International Studies (CSIS), echoed the concerns, but said the EU could potentially surrender some ground without undermining their principles.

But the parties "haven't gotten down to that level of conversation yet," he said.

Taxation

Taxes are another major area of disagreement between the U.S. and the EU, Rizzi said, noting that Trump sees tariffs as accounting for supposedly unfair taxes placed on U.S. companies and goods by European countries.

That includes so-called value-added taxes, or VAT, which are levied on each stage of the supply chain as a product's value changes. While very common globally, the U.S. doesn't operate VAT, and Trump has billed it as a trade barrier — and a justification for tariffs.

"However, the EU value-added tax treats domestic and foreign goods exactly in the same way and in Europeans' eyes, taxation is a purely domestic issue that should not be part of any trade discussion," Rizzi said. "Taxation is a red line for the EU in trade discussions."

Mismatched worldviews

A much broader issue between Washington and Brussels appears to be a fundamental lack of trust and alignment on negotiations and their goal.

Jacob Kirkegaard, non-resident senior fellow with the Peterson Institute for International Economics, went as far as saying that "there's only really one sticking point, which is that Trump wants tariffs on the EU, and the EU is not having it."

CSIS's Luck struck a similar tone, flagging that, philosophically, the U.S. and EU have starkly different views going into the talks.

"This [U.S.] administration views these negotiations through a lens of how partners can concede to concessions to help us. They do not view this as a traditional reciprocal trade conversation, where we give something and they give something," he explained.

The EU has a much more traditional view, he said, as demonstrated by its zero-for-zero tariffs suggestion — which faced pushback from the White House.

European politicians are "proud people who think of themselves as being on a equal footing to the United States" who can't make "constant" concessions, nor do they feel like they should have to, Luck said.

Will there be a deal?

The U.S. appears unlikely to accept a zero-for-zero agreement or one where tariffs are lowered for both parties, Luck said.

It's also doubtful the EU can secure a deal like the U.K., which agreed to certain quotas and tariffs on some critical sectors.

That's because firstly, the bloc would likely not accept similar conditions to the U.K., Luck added, but also "because this [U.S.] administration has much bigger, sort of fundamental complaints about European policy."

He does, however, see a scenario where the EU may agree to a lower tariff, such as the 10% currently in place — but only because it has to.

Rizzi also suggested that perhaps a "limited deal that scales back or freezes tariffs on specific sectors" could happen. But, he noted, this does not mean a broad agreement is imminent.

"I'm very skeptical that a deal will happen," Kirkegaard, who is also a senior fellow at Bruegel, said.

"I think it is much more likely that there's no deal, the EU then retaliates, and then we'll have to see whether Trump does with what he did with China: that he retaliates again, and maybe the EU retaliates again."

He warned that de-escalation — and a deal — might only be possible when a certain, very high, threshold of economic pain is met.

Source: CNBC