Trump plans to impose a 20% tariff on all EU goods if no deal is reached by August 1

Donald Trump has decided to jack up tariffs on every single good coming from Europe, pushing for a baseline rate of 15% to 20% in the next trade deal, according to the Financial Times.

This comes after multiple rounds of back-and-forth talks with Brussels that aimed to hold tariffs at 10%, but that idea’s been tossed.

The White House has rejected the EU’s last offer to ease auto tariffs, and officials close to the negotiations say Trump is completely fine keeping duties on European cars locked at 25%, just like they are now.

This escalation is all part of Trump’s strategy to pressure the EU as they approach his August 1 deadline. If there’s no deal by then, he’s planning to hit all European imports with a 30% tariff, no exceptions.

A U.S. official allegedly told the Financial Times that even if both sides reach some kind of agreement, Trump still expects “reciprocal” tariffs to stay above 10%. That’s a hard red line. And with time running out, Europe’s got almost no room to maneuver.

EU fears retaliation but faces internal divide

On Friday, Maroš Šefčovič, the European Commissioner for Trade, gave a closed-door briefing to EU ambassadors after his Washington meetings. Two diplomats present said Maroš painted a bleak picture. The U.S. side didn’t budge, even as Brussels tried to pitch targeted cuts for specific sectors. No deal, no movement, just a wall.

The same day, German Chancellor Friedrich Merz publicly admitted things weren’t going well. “Whether we can still create sectoral rules, whether we can treat individual sectors differently from others, is an open question,” Friedrich said. “The European side supports this. The American side views it more critically.”

With Trump’s tariffs now looking like they’ll stay between 15% and 20%, the rates would land right where they were back in April, when trade talks started. That’s a full reset. A senior EU diplomat warned Brussels might be forced to retaliate, especially since the U.S. already slapped 50% duties on EU steel and aluminum. “We don’t want a trade war, but we don’t know if the U.S. will leave us a choice,” the diplomat said.

A second EU official confirmed things are shifting: “The mood has clearly changed” toward retaliation. “We are not going to settle at 15%,” they said, pushing back against settling for a number Trump seems locked into.

Stock markets dip as Brussels readies countermeasures

News of Trump’s latest demands caused a dip in U.S. markets. The S&P 500 dropped 0.2% after the story broke. But most traders are brushing it off. They’ve seen this before. Back in April, Trump threw global trade into chaos when he imposed high reciprocal tariffs on nearly all of America’s major trade partners. Later, he rolled those tariffs down to 10% for a temporary 90-day window, but the damage was already done.

Still, U.S. stocks have climbed since then. Markets even rallied to new highs. That momentum may be why Trump doesn’t feel pressure to back off, even as warnings pile up from economists. They’ve flagged risks of rising inflation tied to his trade strategy, but so far, consumer prices in the U.S. only ticked up slightly this month. That minor bump hasn’t changed anything at the White House.

In the meantime, the U.S. pulled in nearly $50 billion in extra customs revenue during the second quarter alone. And so far, no major trading partner has followed through with full retaliation. That includes Europe, which has been planning—and delaying—counter-tariffs for months. But with the August 1 deadline now looming, those plans are finally moving.

Brussels is preparing to roll out duties on €21 billion worth of U.S. goods starting August 6. That includes chicken and jeans. Another package targets €72 billion, with bourbon and Boeing aircraft on the hit list. A third group of countermeasures is still being drafted, and will likely include new taxes on digital services and online ads, according to someone involved in the talks.

The U.S. currently imports €380 billion in EU exports annually, which is out of a total €532.3 billion. That makes the U.S. the EU’s biggest single customer, accounting for a fifth of all European exports.

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