The European Union is trying to finalize a trade agreement with the United States before the July 4 deadline set by Donald Trump. The timeline was introduced after his conversation with European Commission President Ursula von der Leyen. If Brussels fails to complete the process on time, Washington could increase pressure on European exports through new tariffs.

The main threat is aimed at the auto industry. Trump said the U.S. could raise tariffs on European car imports from 15% to 25%, accusing the EU of moving too slowly on a deal signed nearly a year ago. The European Commission responded that it is ready to defend the bloc’s interests if the U.S. follows through.

Under the agreement, the EU would remove tariffs on U.S. industrial goods, while Washington would keep a 15% tariff ceiling on most European products. But European officials argue that the U.S. has already undermined the deal by extending 50% duties to hundreds of categories of European steel and aluminum.

The European Parliament has approved the agreement with amendments, making its entry into force conditional on U.S. compliance. The final version still needs approval from the main EU institutions. For markets, the risk is clear: if talks fail, the trade dispute between two of the world’s largest economic blocs could enter a new escalation phase.