The European Union and South Korea said on Monday they were working on trade deals with U.S. President Donald Trump that would soften the blow from looming tariffs as Washington threatens to impose hefty duties from August 1.

Trump stepped up his trade war on Saturday, saying he would impose a 30% tariff on most imports from the EU and Mexico from next month, adding to similar warnings for other countries including Asian economic powerhouses Japan and South Korea.

White House Economic Adviser Kevin Hassett said on Sunday that countries’ trade deal offers so far have not satisfied Trump and “the tariffs are real” without improvements to their proposals.

“The president thinks that deals need to be better,” Hassett told ABC’s This Week program. “And to basically put a line in the sand, he sent these letters out to folks, and we’ll see how it works out.”

European Trade Commissioner Maros Sefcovic expressed optimism that Washington and the EU were approaching a positive outcome for both sides. He warned, however, that a 30% tariff would practically eliminate trade between the U.S. and the 27-nation bloc, which are currently each other’s largest trading partners.

“We continue to engage with the U.S. administration and prioritise a negotiated solution by the new deadline of August 1. I cannot imagine walking away without any effort,” Sefcovic said ahead a meeting with EU trade ministers in Brussels.

German Chancellor Friedrich Merz, meanwhile, issued a stark warning on Sunday regarding the impact of a tariff at that level on the EU’s largest economy.

The EU has so far held off on retaliatory measures to avoid a spiralling tit-for-tat escalation in the trade war while there remains a chance of negotiating an improved outcome.

But Italy’s Foreign Minister Antonio Tajani said the EU has already prepared a list of tariffs worth 21 billion euros ($24.5 billion) on U.S. goods if the two sides fail to reach a trade deal.

The impact on European spirits companies, many of which rely heavily on the U.S. market, was also mixed.

Shares in Diageo, whose U.S. business is driven by sales of Canadian whisky and Mexican tequila, rose 1% in early European trade. Rival Pernod Ricard, maker of Jameson Irish whiskey, saw its shares fall 1%, while cognac maker Remy Cointreau dropped 2.4%.

Source: Globalbankingandfinace