The US-EU trade agreement: 15% one way and uncertainty the other
28 July 08:51
The European Union and the United States have reached a compromise in difficult negotiations, avoiding a trade war that could have dealt a serious blow to the global economy. According to the agreement, the EU will face 15% tariffs on most of its exports, including cars, "Komersant Ukrainian" reports citing Bloomberg.
The agreement was made less than a week before Friday’s deadline for the increased tariffs from US President Donald Trump to take effect. The agreement was announced on Sunday at Trump’s golf club in Turnberry, Scotland, where the American president and European Commission President Ursula von der Leyen met.
Several European leaders were quick to welcome the agreement. German Chancellor Friedrich Merz and Italian Prime Minister Giorgia Meloni called the agreement “sustainable.” Trump characterized it as “the greatest of all agreements,” and von der Leyen said it would bring “stability” and “predictability.”
Markets reacted positively to the news of the deal. Futures on the S&P 500 index rose by 0.4%, and contracts on European stocks jumped by 1%. The euro also strengthened against the dollar. Experts noted that the EU played its bad cards the best it could under the circumstances.
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Details of the trade agreement
the 15 percent tariffs will take effect on August 1 and will cover a wide range of European goods. Initially, there were disagreements between the leaders on the details: Trump said the tariffs would apply to “cars and everything else” but not pharmaceuticals and metals. Von der Leyen, however, explained that the 15 percent rate would be comprehensive and cover medicines, chips, and cars.
As for metals, duties will be reduced and a quota system will be introduced instead. Steel and aluminum will remain under 50 percent tariffs and will not be covered by the new agreement. Aerospace tariffs will remain at zero until the completion of the relevant investigation.
As part of the agreement, the EU has committed to purchase $750 billion worth of U.S. energy products and invest an additional $600 billion in the U.S. over and above existing spending.
It is not entirely clear what the EU imposes on American goods. According to Trump, nothing.
“The EU has agreed to purchase $750 billion worth of American energy products, invest $600 billion in the United States above and beyond existing spending, open its markets to trade with the United States at zero tariffs, and purchase ‘vast quantities’ of military equipment,”
– Trump said.
It is worth noting that Trump’s and von der Dyen’s statements on the deal differed immediately after its conclusion, so it is difficult to say whether the EU will not impose any tariffs on US goods. The head of the European Commission has not said anything about this, and neither the text of the agreement nor the joint statement of the parties has been published.
The key to achieving a 15 percent rate on pharmaceuticals and semiconductors was the bloc’s promise to invest in the United States. The issue of European wine and spirits remains unresolved, but should be resolved in the near future.
Without this agreement, the average effective tariff rate of the United States would have risen to almost 18% on August 1, compared to the current 13.5%. The new agreement reduces this figure to 16%.
The agreement removes a serious risk for markets and the global economy, as it affects $1.7 trillion in cross-border trade, although European shipments to the United States will continue to be subject to higher taxes at the border.
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