EU, US Close in on Trade Deal with Trump, With Higher Tariffs Than UK

Strategic Insights -

Brussels negotiators are nearing a trade deal with US President Donald Trump that will cement higher tariffs than those granted to the UK. The EU is set to sign a temporary "framework" agreement that maintains 10 per cent "reciprocal" tariffs, matching the baseline duty imposed on the UK. However, the EU is not expecting to achieve the same access to the US market as British products. Trump is also demanding 17 per cent tariffs on EU agrifood products. Diplomats have expressed surprise at the EU's current terms, citing London's better deal in May.

Key Takeaways:

  • The EU is on the verge of signing a temporary trade deal with the US, with Donald Trump maintaining 10 per cent "reciprocal" tariffs.
  • The EU is not anticipating the same level of access to the US market as British products, which secured reduced tariffs in May.
  • Trump is demanding 17 per cent tariffs on EU agrifood products, a significant increase on the baseline 10 per cent duty.
  • The UK was granted an annual quota of 100,000 cars at a 10 per cent tariff, as well as a zero-tariff deal on steel and aluminium, and "significantly preferential" treatment on sectoral tariffs.
  • In return, the UK pledged to meet US requirements on China's role in its supply chains, and secured assurances on future 232 investigations.
  • The EU has not secured guarantees on reducing tariffs on steel, with the 50 per cent level remaining in place.
  • The US has declined to exempt the EU from future sectoral tariffs in areas such as pharmaceuticals and semiconductors.
  • The two sides are working on plans to reduce the 25 per cent tariff on vehicles and are considering an agreement to abolish levies on spirits, aircraft, and parts.

Statistics:

  • 10 per cent - The EU's approved "reciprocal" tariffs under the temporary trade deal.
  • 17 per cent - Trump's demanded tariffs on EU agrifood products.
  • 100,000 - The annual quota of cars the UK was granted at a 10 per cent tariff.
  • 13,000 tonnes - The tariff-free quota of beef the UK agreed to purchase.
  • 1.4 billion litres - The tariff-free quota of bioethanol the UK agreed to purchase.
  • 50 per cent - The current tariff level on EU steel.
  • €198bn - The EU's trade surplus in goods.

Sources:

  • Anna Cavazzini, chair of the European parliament's internal market committee
  • Sir Keir Starmer, UK prime minister
  • Bernard Arnault, LVMH chief executive
  • Friedrich Merz, Germany's chancellor
  • David Henig, European Centre for International Political Economy think-tank