EU: Skeleton of a US deal – Standard Chartered

US-EU deal is achievable; it may come after 9 July, but tariff reprieve is likely to be extended. EU likely to consider unilateral tariff cuts and streamlining of regulatory burden to mollify Trump. Baseline US tariff of 10-20% likely to remain part of deal; scope for escalation is still high, Standard Chartered's economists Christopher Graham and Saabir Salad report.

EU offer likely to expand in coming weeks

"We think the outline of a EU-US trade deal is emerging. We think a unilateral lowering of some EU tariffs (such as on cars), a pledge to buy more US imports (in areas such as LNG and defence), and an offer to simplify or ease certain regulatory burdens facing US firms selling into the European market would be sufficient to deliver a deal; we do not expect EU tax cuts (on VAT or digital service taxes) to form part of any deal. As important as the detail of any deal, however, is the way it is presented."

"EU trade negotiators appear to be shifting towards unilateral offerings on tariffs and regulations, without demands for quid-pro-quos from the US side, and a willingness to accept a minimum US baseline tariff (10-15%) without resorting to retaliation will be key for any deal to endure. However, the EU will hope that some concessions on sectoral tariffs (particularly autos and pharmaceuticals) can be achieved. We acknowledge the risk that negotiations could sour, and tariffs could escalate in the coming weeks, but ultimately, we would expect any game of brinkmanship to subside and deliver a deal; both sides are incentivised to avoid a tit-for-tat escalation in tariffs."

"In terms of timeframe, the 9 July deadline (when US tariffs on the EU are set to increase to 50%) remains difficult, but not impossible. An extension of the current tariff reprieve offered by the US beyond 9 July is likely if sufficient progress has been made by negotiators over the coming weeks; the G7 meeting (16-17 June) and NATO summit (24-25 June) could serve as springboards for high-level agreements and announcements around progress."