European Union (EU) Economic Commissioner Valdis Dombrovskis said that the United States and the European Union still need a lot of work to reach a deal that would prevent the imposition of tariffs on each other’s goods.

Dombrovskis said this on the sidelines of the International Monetary Fund (IMF) meetings in Washington.

Recall that the US imposed 25% tariffs on EU cars, steel and aluminium in March and 20% tariffs on other EU goods in April.

It then halved the 20% rate until July 8, setting a 90-day window for talks to reach a more comprehensive tariff deal.

Responding, the EU suspended its own tariffs on some US goods and proposed zero tariffs for all industrial goods on both sides.

According to Dombrovskis, the zero-tariff offer met with only moderate US interest.

“There’s a lot of work ahead to come to more concrete parameters and elements and areas of cooperation which would allow us to avoid the implementation of tariffs,” Dombrovskis said.

The United States reportedly sees the EU’s value-added tax as one of the non-tariff trade barriers, but Dombrovskis said the 27-nation bloc did not see VAT as impacting trade at all and was not ready to include the tax in trade discussions.

“It’s not a trade barrier at all and it does not belong to the conversation. The value-added tax is a consumption tax, similar to the sales taxes in U.S. states on sales of domestic and imported goods,” he said.

According to him, VAT was a major source of budget revenue for European governments and for the EU budget as well.

“So the value-added tax doesn’t belong to these conversations,” he added.

US, EU not close to deal on tariffs – Economic Commissioner