Trade Latest: Europe Braces for Higher Tariffs, China Magnet Exports Jump

The European Union is preparing retaliatory measures against the U.S. if a deal can’t be reached. (Photograph by Jasper Juinen/Bloomberg)

The Aug. 1 deadline for new trade deals before tariffs go up is getting closer, but an agreement with the biggest trading partner looks further away.

U.S. officials told European Union negotiators last week that further concessions are likely to be demanded to get a deal over the line, The Wall Street Journal reported Monday. That was a surprise to the EU, which thought a deal for 10% tariffs was close. It now looks like the rate could be 15% or higher, according to the report that cites people familiar with the talks.

The EU, a bloc of 27 nations, trades more with the U.S. than even China. It’s preparing retaliatory measures to hit back against U.S. companies if an agreement can’t be reached, the newspaper said. They could include taxes on digital services that could be aimed at U.S. technology companies such as Alphabet , the parent of Google, or Meta Platforms , which owns Facebook.

A setback with the EU could be a shock for American investors who are still pushing stocks higher, largely on the view that trade deals will get done, and that the tariffs aren’t that damaging. An agreement could still be reached, but it looks less likely than it did a week ago.

Over in Japan, the ruling government coalition lost its majority in the upper house, weakening Prime Minister Shigeru Ishiba’s position by making it harder to persuade lawmakers to back any agreement reached. Trump has already said he doesn’t expect to get a deal with Japan before the Aug. 1 deadline.

Separately, China’s exports of rare-earth magnets, critical for electronics and batteries, surged in June from the previous month after trade negotiations with the U.S. advanced. Still, volumes from a year earlier decreased 38%. China produces about two-thirds of rare-earth minerals and has used its dominance as a card in trade negotiations with the White House.

Write to Brian Swint at brian.swint@barrons.com