EU faces challenge to avoid higher levy

The European Union will push for a trade deal with the United States ahead of the new Aug 1 deadline in the hope that it can avoid the worst of President Donald Trump's tariffs.

The bloc had been scrambling to agree a deal before the previously-set deadline of July 9, only for Trump to push it back on Sunday.

If Brussels fails to land a deal in time, the current 10 percent tax on EU exports to the US could rise to the 20 percent rate originally imposed on April 2, or the 50 percent Trump threatened more recently, when talks were moving slowly.

Trump told reporters the deadline would be temporarily delayed, and that his staff would send out letters to nations, explaining the new tariff rate, should they fail to secure a deal in time.

US Treasury Secretary Scott Bessent later told the broadcaster CNN: "President Trump's going to be sending letters to some of our trading partners saying that if you don't move things along, then, on Aug 1, you will boomerang back to your April 2 tariff level."

Bessent said "the EU was very slow in coming to the table" initially, but that recently talks had made "very good progress".

While the extra days offer a glimmer of hope to EU negotiators, Reuters reported the bloc, which is Washington's largest trading partner, is concerned it may not be able to secure a full comprehensive trade deal in time, and that it may need to focus on landing a lighter agreement in principle.

The EU, which in 2024 shared a combined trade in goods and services with the US of $2 trillion, has also said that, if necessary, it could hit back with tariffs worth $24.7 billion on US exports.

The European Commission, the bloc's executive, is understood to have told negotiators on Friday it believes Washington will leave the current 10 percent tariff in place, if the two sides have an agreement in principle by the deadline.

Ursula von der Leyen, the commission's president, said an agreement in principle could be similar to the deal between the United Kingdom and the US, which ensures the UK remains on the baseline 10 percent tariff while talks continue on a more comprehensive deal.

The bloc's biggest challenge could come in deciding whether to push for an agreement in principle in the short term, or to hold out for a full and comprehensive deal in the longer, as opinion is currently divided over the issue.

But Commission trade spokesperson Olof Gill told reporters the bloc is "working towards July 9 as the point where we want to have a minimum agreement in principle".

The Euractiv news website quoted an EU spokesperson on Monday as saying: "We're fully geared up to get an agreement in principle by Wednesday, and we're firing on all cylinders to that effect."