US and Europe trade negotiators discuss tariffs in Paris

Europe and the United States are meeting in Paris to negotiate a resolution to an escalating tariff conflict that has serious global economic implications.

Maroš Šefčovič, the European Union's chief trade negotiator, met with US Trade Representative Jamieson Greer on Wednesday on the sidelines of the Organization for Economic Cooperation and Development (OECD) meeting. Šefčovič shared a photo of their handshake on social media platform X, stating that both sides are "advancing in the right direction at pace" and maintaining close contact to keep up the momentum.

Despite the ongoing talks, Brussels and Washington are not expected to finalise a meaningful trade agreement during the Paris meeting due to the complexity of the issues involved.

US President Donald Trump continues to express frustration over the persistent US trade deficit with the EU, which reached a record $161 billion last year, according to the US Commerce Department. He attributes the imbalance to unfair trade practices and often criticizes the EU's 10% tariff on imported cars. By contrast, the US tariff was 2.5% before Trump raised it to 25% in April. The EU counters that its purchases of American services—especially in the tech sector—significantly offset the goods deficit.

The trade tensions intensified after the Trump administration unexpectedly imposed new steel tariffs last week, shaking global markets and further complicating the broader negotiations with the EU. In response, the EU announced on Monday that it is preparing "countermeasures" against the United States.

As part of its negotiating position, the EU has proposed a "zero-for-zero" deal that would eliminate tariffs on all industrial goods, including automobiles. Trump has so far rejected this proposal, though EU officials insist it remains available for discussion.

The EU may be open to buying more US liquefied natural gas and defense products and lowering auto tariffs. However, it is unlikely to concede on scrapping the value-added tax (VAT)—a sales tax-like levy—which the US views as a trade barrier. Nor is the EU expected to open its market to more American beef.

French Trade Minister Laurent Saint-Martin said in Paris on Wednesday that there is still time to negotiate. "If the discussion and negotiation do not succeed, Europe is capable of having countermeasures on American products and services as well," he warned.

Greta Peisch, who served as general counsel for the US Trade Representative during the Biden administration and is now a partner at law firm Wiley Rein, suggested the zero-for-zero deal could be a viable path forward—if the Trump administration is interested in avoiding more tariffs. However, she questioned Washington's commitment, noting Trump's longstanding criticism of EU trade policies.

Among Trump's key complaints is the VAT system, which he and his advisers see as unfairly protectionist because it is applied to US exports. However, VATs—implemented at the national level rather than by the EU itself—are applied equally to domestic and imported goods, and have traditionally not been viewed as trade barriers. Major changes to national tax systems to satisfy US demands appear unlikely.

European leaders are also expected to resist US demands to eliminate food and safety regulations that Washington views as non-tariff trade barriers. These include bans on hormone-treated beef, chlorinated chicken, and genetically modified foods.

William Reinsch, a former US trade official, noted, "When you start talking about chickens or GMOs or automobile safety standards, you're talking about the ways countries choose to regulate their economies." While the US sees such regulations as protectionist, European nations argue they are essential for public health—an enduring point of contention for over six decades.