US president Donald Trump has said he believes America will be able to reach a free trade agreement with the European Union without having to impose the tariffs on car imports he has been threatening.

Speaking at a news conference at the end of the G7 Summit in France, Mr Trump said a deal had been discussed and that he hopes financial penalties will be off the table, something that could offer a lifeline for carmakers in Germany in particular.

"We're very close to maybe making a deal with the EU because they don't want tariffs. I think we're going to make a deal with the EU without having to go that route," the president added.

German chancellor Angela Merkel said she is keen to talk about the commencement of deeper negotiations "as quickly as possible".

Discussions held last summer between European Commissioner Jean-Claude Juncker and Mr Trump resulted in the two agreeing to work towards a common trade agreement, but its progress has since stalled due to disagreements concerning agriculture's place in the deal.