A bare-bones deal is Europe’s best hope in trade talks with the U.S., sources say

The clock is ticking in trade talks between Washington and the European Union, with European officials now saying their best hope is striking a “political” deal before a key July 9 deadline, three sources told CNBC.

Concrete details of such a trade arrangement would have to be worked out at a later time.

“The U.S. proposal from last week is aimed at an agreement in principle,” one EU official, who did not want to be named due to the sensitivity of the talks, told CNBC, adding that this agreement in principle would then “be negotiated out into a proper trade agreement at a later stage.”

Previously close allies, the U.S. and EU have had a fractious relationship amid disagreements over trade and support for embattled Ukraine in the months since the start of U.S. President Donald Trump’s second term. Tensions escalated in early April, when White House announced a spate of reciprocal tariffs against most global trade partners, including a 20% levy on the EU. All such duties have been temporarily reduced until July 9 to facilitate talks.

The U.S. sent a new proposal to the EU’s negotiating team last week. European negotiators are having face-to-face talks with their American counterparts later this week with the view to get a deal done in the coming days. Total bilateral trade in goods between the EU and the U.S. accounted for 851 billion euros ($1 trillion) in 2023, according to figures from the European Commission.

European officials expect a new update on the negotiations Friday, but the situation is fluid. On Monday, European ambassadors had conversations about the state of play in the trade negotiations. Lithuania’s Minister of Finance Rimantas Šadžius told CNBC on Wednesday that he is “slightly optimistic” there will be a trade compromise between both sided of the Atlantic.

Despite this, sources told CNBC that, despite efforts to reach a trade compromise, the EU is preparing for any possible outcomes, including the return of reciprocal tariffs.

“The general sense is that in the coming days and weeks, all outcomes, ranging from a successful deal on a framework agreement all the way to higher US tariffs with additional sectors, are still possible,” the same EU official told CNBC.

This sentiment was also shared by European Commission President Ursula von der Leyen last Friday.

“We are ready for a deal. At the same time, we are preparing for the possibility that no satisfactory agreement is reached,” she said at a press conference.

The European Commission was not immediately available for comment when contacted by CNBC Wednesday about an update to the talks.

Another EU official, also speaking to CNBC on the condition of anonymity, said there is an awareness in Brussels that it is almost impossible to return to the trade relationship that the EU and U.S. enjoyed before the April 2 announcement of reciprocal tariffs.

A third EU official, who also chose to speak anonymously, told CNBC that there is a risk that the outcome of the talks will be an “asymmetrical” deal, under which the EU will not escape some additional U.S. levies.

Nonetheless, the bloc is looking to get concessions in critical areas for its economy, including automotive, semiconductors and pharmaceuticals, all three sources confirmed.

The first EU official added that some member states will only agree to a deal in principle if there is a commitment from the Trump administration to “upfront tariff relief.”

The European Commission, the executive arm of the EU, negotiates trade with other parts of the world, but its proposals and position reflects the thinking of the 27 capitals.