The European Union and the US believe they can agree a trade deal before July 9, the deadline by which Washington is threatening to impose 50% tariffs on almost all EU products — which would trigger a series of countermeasures from the bloc. 

European Commission President Ursula von der Leyen privately told EU leaders yesterday that she was confident a deal could be reached before the deadline to avoid an economically damaging escalation, we’re told. During the meeting there was a shift in tone from leaders, with many saying they would accept some imbalances to avoid the situation getting worse. 

The July deadline was imposed earlier this year after Donald Trump unveiled a shock tariffs plan, which was a week later put on pause for three months allowing for new agreements to be struck. 

US Treasury Secretary Scott Bessent said earlier today that other trade agreements could get finished by September 1, suggesting some negotiations are likely to extend past the upcoming July deadline for elevated reciprocal tariffs. He told Fox Business that there are 18 important trading partners, and noted that the US has already done a deal with the UK and reached an accommodation with China, so those two “are behind us for now.” —Helen Chandler-Wilde

What You Need to Know Today

A heatwave is expected throughout western Europe over the next few days, with temperatures as much as 10C above normal forecast. Areas of southern Spain are predicted to reach 42C this weekend, with 40C forecast in southern France. Even London is expecting highs of 35C on Monday. The hot weather has been triggered by winds of hot air from North Africa, according to the UK Met Office, with global warming also boosting the intensity and frequency of heatwaves. Health warnings have been issued in parts of Spain, France and the UK – and the heat has already triggered violent storms in France, which killed two people and left 17 injured earlier this week.

A tourist shields themselves from the sun during a heatwave in Seville Photographer: Cristina Quicler/Getty Images

Inflation in France and Spain has ticked up according to figures released today – to 0.8% and 2.2% – yet not enough to bother the European Central Bank, which is still confident that it will meet its 2% target this year. The numbers show the relatively calm inflation picture across the eurozone, which has given the ECB the space to lower interest rates eight times in a year. The looser monetary environment will give confidence to some as the eurozone economy remains fragile overall, with confidence unexpectedly dipping in June.

European countries are finding it more politically challenging to “Buy American” for military equipment, given the US president has embraced the continent’s main enemy – Russia – and rattled some with threats of annexation. A group of US legislators went to Copenhagen this spring to encourage American weapons sales, but were told that Trump’s public threat to take over Greenland made a purchase politically difficult. Leaders including French President Emmanuel Macron have pressed for contracts to be fulfilled by European companies, and Canada is considering buying Swedish planes instead of US-led F-35 fighter jets. Yet according to a senior NATO official, European allies will have no alternative but to buy American weapons to meet alliance targets, especially as stocks are depleted after supplies have been given to Ukraine.

Iran has denied that nuclear talks with the US are scheduled to resume, dimming hopes for a diplomatic solution after Trump suggested that an agreement could be struck as early as next week. “I say explicitly that no agreement, arrangement or discussion has taken place regarding the initiation of new negotiations,” Foreign Minister Abbas Araghchi said in an interview with state TV late last night. He also rebuffed a request by United Nations inspectors to assess the extent of the damage at nuclear facilities bombed by the US and Israel, a campaign described by Macron as effective.

A major parliamentary rebellion less than a year into UK Prime Minister Keir Starmer’s tenure has forced his government into a U-turn over a plan to cut disability benefits – a costly change that makes further tax hikes more likely, and seriously questions his authority. The prime minister agreed late last night to soften the impact of the cuts, making changes that would cost an estimated £3 billion a year, nearly half the value of the original proposed cuts. The rebellion is politically challenging for Starmer, particularly given he has a large working majority which means it should be easy to pass legislation. It also puts both his Chancellor Rachel Reeves, and her fiscal rules, at risk. 

Mounting public and private sector debt are fueling the risk of a new financial crisis, according to German Chancellor Friedrich Merz, speaking at a press conference today in Berlin. At an EU summit yesterday, several leaders privately highlighted the increasing danger of government debt — including Spanish Prime Minister Pedro Sanchez, who asked how Europe could up defense spending to 5% of GDP given the constraints on public finances, according to people familiar with the discussions. “We have a record high for state debt, a record high for corporate debt, and a record high for private household debt. None of this is a healthy development,” said Merz.

Merz yesterday Photographer: Simon Wohlfahrt/Bloomberg

Germany’s minimum wage should be increased in two steps to €14.60 ($17.11) in 2027 according to an independent commission, an idea that could provoke discord within Chancellor Friedrich Merz’s coalition government. Merz’s conservative bloc agreed to a demand by their Social Democrat partners that a minimum wage of  €15 an hour was achievable by next year. Yet the commission has decided on a lower level – and at a later date – which could create unhappiness for some. The commission publishes its recommendation on minimum wage increases every two years, and the government must implement the proposal unchanged.

What You’ll Need to Know Tomorrow

For Your Commute

Staying hydrated is important in summer. Luckily, there are plenty of interesting ways to do that this year, with a range of ready-to-drink cocktails and mocktails on offer. Bloomberg Pursuits has picked the best nine for you, from a cardamom-and-citrus-flavored spritz to a booze-free option that contains real seawater and oyster shells.