EU and US Close in on Trade Deal with 15 Percent Tariffs on European Imports

Negotiators from the European Union and the United States are nearing a trade deal that would impose 15 percent tariffs on European imports, mirroring a similar agreement struck with Japan. The EU could consent to the reciprocal levies to avert a potential 30 percent tariff increase threatened by US President Donald Trump. "The Japan agreement made clear the terms of the shakedown," said an EU diplomat, adding that most member states are willing to accept this deal. The agreement would exempt certain products, including aircraft, spirits, and medical devices, from tariffs. The EU's exporters have been paying an additional 10 percent tariff on goods sent to the US since April, in addition to pre-existing duties averaging 4.8 percent.

Key Takeaways:

• The EU and US are closing in on a trade deal that would impose 15 percent tariffs on European imports, similar to the agreement with Japan.
• The deal would include existing duties, with tariffs on cars falling from 27.5 percent to 15 percent.
• The EU's exporters have been paying an additional 10 percent tariff on goods sent to the US since April, on top of pre-existing duties averaging 4.8 percent.
• The agreement would exempt certain products, including aircraft, spirits, and medical devices, from tariffs.
• The EU could still retaliate if Trump tried to push further or followed through on his threat to raise reciprocal duties to 30 percent from August.
• The bloc will continue to prepare a possible €93bn of retaliatory tariffs, of up to 30 percent, in case a deal cannot be agreed by August 1.

Statistics:

• The EU's exporters have been paying an additional 10 percent tariff on goods sent to the US since April.
• Pre-existing duties on EU goods average 4.8 percent.
• Tariffs on cars would fall from 27.5 percent to 15 percent under the proposed deal.
• The EU could impose €93bn of retaliatory tariffs, of up to 30 percent, in case a deal cannot be agreed by August 1.
• Shares in Japanese auto producers surged yesterday, with Toyota and Honda rallying more than 14 percent and 11 percent respectively.

Sources:

• Three people familiar with the situation told the Financial Times.
• "The Japan agreement made clear the terms of the shakedown," said an EU diplomat, requesting anonymity.
• A US official said the situation was fluid and subject to change.
• News of the prospective deal boosted the euro, which recouped earlier losses to trade flat on the day against the dollar.
• US stocks extended gains, with the S&P 500 up 0.6 percent.