EU says it is making progress on framework trade agreement with US – positive for the European indices

The European Union said it was on track to conclude a framework trade agreement with the United States after the bloc’s chief executive, Ursula von der Leyen, held a conversation with the president Donald Trump on Sunday.

“They had a good exchange of words,” EU spokesman Olof Gill told reporters in Brussels on Monday. “We are at the beginning of the final stage, at least as far as an agreement in principle is concerned.”

The EU is rushing to strike a trade deal with Trump before tariffs on nearly all of its exports to the U.S. jump to 50%. Trump has imposed tariffs on nearly all of the U.S.’s trading partners, saying he wants to bring back local manufacturing, pay for the extension of tax breaks and prevent other countries from taking advantage of the U.S.

EU and US negotiators worked over the weekend to hammer out a tentative deal that would avoid a massive tariff escalation. Ambassadors from the bloc scheduled a last-minute meeting on Monday afternoon to receive a briefing from the European Commission on the talks, EU diplomats said.

Trump said he would announce the trade agreements on Monday and that trading partners would have until Aug. 1 before the tariffs would go into effect. That gives them three more weeks to make deals. The administration had previously said the tariffs would go into effect on July 9.

The EU has said it is ready to accept a deal that includes a 10% universal tariff on many of its exports, but wants the US to commit in advance to lower rates than those set for key sectors such as pharmaceuticals, alcohol, semiconductors and commercial aircraft, Bloomberg reported earlier.

The EU is also pushing the US for quotas and exemptions to effectively reduce Washington’s 25% tariff on cars and auto parts, as well as its 50% tariff on steel and aluminum. Negotiations on these sectoral levies have been particularly difficult. Some carmakers and major cities are pushing for a mechanism that would provide tariff relief in exchange for investment and production in the US.

The initial framework agreement will also cover non-tariff barriers, economic security and cooperation in areas such as digital trade.

German Chancellor Friedrich Merz held talks over the weekend with the French president Emmanuel Macron, Italian Prime Minister Georgia Meloni and Commission President von der Leyen to discuss how to resolve the trade dispute.

“Time is running out,” Merz’s chief spokesman, Stefan Cornelius, told reporters in Berlin on Monday. “I am always optimistic, but the committee is considering different scenarios.”

Any deal ultimately depends on Trump, and expected resolution scenarios include an agreement in principle that preserves the current truce without introducing new tariffs; continuing negotiations without a deal and putting into effect country-specific tariffs that were suspended; or the US deeming the EU to have failed to meet its terms and announcing more unilateral tariffs, Bloomberg previously reported.

“We want a negotiated solution, but you know that at the same time we are preparing for the possibility that a satisfactory agreement will not be reached,” von der Leyen told reporters last week. “We will defend the European interest when necessary – in other words, all tools are on the table.”

The EU has approved tariffs on 21 billion euros ($24.6 billion) worth of US goods that could be quickly implemented in response to Trump’s tariffs on metals. They target politically sensitive US states and include products such as soybeans from Louisiana, home of House Speaker Mike Johnson, as well as agricultural products, poultry and motorcycles.

The bloc has also prepared an additional list of tariffs on 95 billion euros worth of American products in response to Trump’s so-called reciprocal tariffs and auto tariffs. They will target industrial goods including Boeing Co. planes, U.S.-made cars and bourbon. The EU is also consulting with member states to identify strategic areas where the U.S. relies on the bloc, as well as potential measures that go beyond tariffs, such as export controls and restrictions on public procurement contracts.

The EU will assess each final outcome and at that stage decide what level of asymmetry it is willing to accept and whether rebalancing measures will be necessary, Bloomberg previously reported.

Analysts forecast that earnings per share on the Stoxx Europe 600 will grow 2% in 2025 from a year ago, an estimate that is consistent with a 20% tariff rate, according to Citigroup Inc. strategists led by Beata Mantei.

“This could mean improvements to bottom-up forecasts if favorable tariff outcomes materialize,” they wrote in a note last week. Earnings would likely fall by 4% in the event of a 50% tariff rate, they said.

The strategists added that market pricing is more optimistic, meaning the stock “risks being caught at a disadvantage if tariffs are reintroduced at 20% or reach 50%.”(Meeting updates in the fourth paragraph, earnings outlook in the last three.)