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A draft agreement on reciprocal trade touches a litany of economic disputes between the economies—but not tariffs

Key Points

The U.S. and European Union appear to be nearing a deal on multiple non-tariff trade issues from deforestation rules to the treatment of U.S. tech companies in Europe—but the fate of looming tariffs set to be imposed by each trading partner remains unclear.

A draft “agreement on reciprocal trade” circulated by the U.S. Trade Representative’s office lays out tentative deals on a litany of specific trade issues, including the EU’s Digital Markets Act, its carbon-based border tariffs, shipbuilding and more, according to people with knowledge of the text, who said the agreement appeared to be close to final but emphasized it could change in the coming days and weeks.

But the text, the people said, doesn’t specifically address any of the tariffs that President Trump has threatened or imposed on the EU—from the 20% reciprocal tariff that Trump paused in April to higher duties on specific industries like automobiles and steel, the people said. It also doesn’t detail the EU’s proposed retaliatory tariffs, set to kick in on July 14 if no deal can be struck.

It remains unclear if tariff issues will be addressed in a separate deal, if those talks are at an impasse, or if the sides will decide to extend those negotiations beyond Trump’s July 9 tariff deadline. And it is also uncertain if the EU is on board with all of the provisions of the draft deal. The U.S. government and representatives for the EU’s executive body declined to comment on the details of the proposed agreement, but an EU spokesperson said the sides are “fully and deeply engaged in negotiations,” and that “a negotiated, mutually beneficial solution remains our preferred outcome.”

While it doesn’t address tariffs, the draft agreement covers a number of longstanding economic pain points for U.S. firms. It would see the U.S. and EU enter a dialogue on how to implement Europe’s Digital Markets Act—a tech-competition law that has drawn complaints from large American firms—and exempt U.S. companies from enforcement during those talks.

The bloc has already fined two American companies under the law: Apple and Meta Platforms. Exempting U.S. companies, which are responsible for most of the platforms regulated by the DMA, would largely defang one of the bloc’s signature digital laws.

The draft text also says the EU will delay implementation of its deforestation regulation for a year. That change in timing doesn’t appear to be new: The EU decided late last year to delay the deforestation rules after companies inside Europe and in other regions said they needed more time to comply.

The draft agreement would also see the U.S. and EU coordinate on Europe’s design and implementation of a carbon border adjustment mechanism—a tariff that would reflect the carbon-intensity of imports—and U.S. products would be exempted for a year after the policy is put in place. U.S. energy exports to Europe would also be exempt from EU methane rules.

Additionally, the EU will consider measures to encourage shipbuilding and shipping from market economies, similar to the penalties and fees for Chinese cargo ships that the U.S. government proposed earlier this year, according to the draft text. The U.S. and EU would also coordinate on defense procurement and critical minerals, among other provisions.

The draft text comes after weeks of U.S. and EU officials trading documents and holding talks in hopes of reaching an agreement ahead of the July 9 tariff deadline.

After the EU shared a proposal laying out what it was willing to negotiate in trade talks, U.S. Trade Representative Jamieson Greer said in early June that the bloc had provided “a credible starting point” for discussions, which he said were advancing quickly.

The EU’s proposal covered tariffs, non-tariff barriers and ways for the EU to purchase more U.S. goods, including liquefied natural gas, people familiar with the matter said.

The draft agreement circulated by the USTR’s office on Friday appears to address only a set of non-tariff barriers that it suggests the EU could lower.

It is unclear what, if anything, the U.S. might be willing to offer the EU in return. European officials have said they wouldn’t sign up to a deal that offers unilateral concessions, in part because they believe European voters would reject it.

Some European officials have also said that they would be unwilling to accept a trade deal with the U.S. that keeps Trump’s 10% baseline tariff in place. But with Trump touting that tariffs are generating revenue, many are accepting that they won’t be able to negotiate away the baseline tariff, according to people familiar with EU thinking.