Negotiators say a draft deal could let commercial aircraft dodge fresh duties, which would be a huge win for Airbus. Carmakers with US factories, like BMW and Mercedes, also look set for relief. Ferrari, though, might not be so lucky.
US President Donald Trump said he is probably two days off from sending the European Union a letter disclosing the tariff rate on their exports to the U.S.
Trump said during a Cabinet meeting at the White House that the EU had been treating the U.S. very nicely recently in trade talks.
Airbus takes centre stage
Protecting Airbus is top of Brussels’ list. The aircraft giant is more than just a jet maker. Its sprawling network of plants in France, Germany, China, Canada and Alabama makes it a symbol of European industrial clout.
John Strickland, aviation analyst at JLS Consulting, explained why it matters. “It’s absolutely the banner-waver for European aircraft manufacturing,” he said. If tariffs push up prices, he warned, that “would potentially have a significant dampening effect on demand and therefore the whole financial success of Airbus.”The EU’s industry chief Stephane Sejourne made it clear last month that Airbus must not face “unfair competition” from US rival Boeing, which only builds planes domestically. “If we don’t rebalance we would leave some leading sectors unprotected, so there’s an economic interest in acting like this,” Sejourne told Bloomberg.
Back to 1979? US open to old deal
Hopes for a breakthrough rose last month when US Transportation Secretary Sean Duffy suggested rolling back to the old 1979 aviation deal that scrapped tariffs on planes and parts. “We should take aviation off the negotiating table, by going back to 1979, and that only helps us take some tools away from our trading partners where it might be beneficial to us,” Duffy told reporters at the Paris Air Show.
But the clock is ticking. Without an agreement, tariffs on EU exports to the US could spike from 10% to 50% overnight. EU estimates put affected exports at 380 billion euros, about 70% of the bloc’s shipments to America.
Winners and losers in the car sector
German brands stand to gain the most from possible carve-outs. The US wants European carmakers to shift more production to its soil to dodge the worst tariffs. BMW, Mercedes and Volkswagen are ready. Ferrari and Porsche, not so much.
Porsche and Ferrari ship all their cars from Europe. They do not have plants in the US, so they would face higher costs. Volkswagen’s Audi brand is still weighing its options. It might start building cars in America, but a site has not been picked yet.
Even so, the pressure is real. Audi’s Q5 SUV is a top seller in the US but comes from Mexico. Sales tumbled 29% last quarter. Mercedes will move production of its popular GLC SUV to Alabama by 2027 to avoid future shocks.
Tough talk and final stretch
Germany’s finance minister Lars Klingbeil underlined the stakes this week. “We want an agreement with the Americans,” he told lawmakers in Berlin. “But the deal must be fair and if we do not succeed in reaching a fair deal with the US, then the EU will have to take countermeasures to protect our economy.”
Europe’s economy chief Valdis Dombrovskis added urgency in Brussels. “The faster we can reach the agreement, the better, because that would remove uncertainty surrounding these tariff questions and indeed we see that it is weighing on the economy and also on investment decisions of the companies,” he said.
For now, talks continue under Trump’s extension of the deadline from 9 July to 1 August. EU diplomats say exemptions could still cover spirits and cosmetics alongside aircraft and cars. Steel is proving tougher. Washington’s 25% steel tariff still stands with no sign of budging.
With US and EU trade worth billions, neither side can afford a collapse. The EU has already slashed its 2024 growth forecast from 1.5% to 1.1% because of the trade fight. If the deal falls through, tariffs could double or more, stoking fresh economic pain on both sides of the Atlantic.
Brussels and Washington now have weeks, not months, to find common ground. The stakes are clear. Some European companies will win. Some may lose. But everyone is waiting for that signature on the dotted line.
(With inputs from TOI, Bloomberg)
