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Tariffs

Trade Tensions Escalate as EU and US Reach Agreement on Tariffs

Strategic Insights

— 2 min read

Trade tensions between the EU and US have reached a new level, with the two parties reaching a framework agreement on tariffs that will see European imports to the US subjected to 15% duties, except for pharmaceuticals, lumber, and semiconductors. The agreement comes as the UK's steel industry faces further challenges, with another major manufacturer, Liberty Steel, receiving government support after entering administration.

Key Takeaways:

  • The EU and US have reached a framework agreement on tariffs, with 70% of European imports to the US set for 15% duties.
  • Tariffs on EU pharmaceuticals, lumber, and semiconductors will be capped at 15%, while automotive tariffs will fall from 27.5% to 15% if the EU agrees to remove tariffs on US industrial goods.
  • EU trade commissioner Maros Sefcovic has stated that the agreement is "not the end, but the beginning," and that the framework is a first step towards resolving trade tensions.
  • The agreement comes as the UK's steel industry faces further challenges, with Liberty Steel receiving government support after entering administration.
  • UK Steel director Gareth Stace has welcomed the government's recognition of the importance of the Liberty Speciality Steel assets and hopes that a new owner is found quickly.
  • The company produces steel for military equipment, vehicles, and oil and gas components, and employs 1,450 at its South Yorkshire site.
  • The UK's inflation rate has jumped to 3.8%, the highest level since January 2024, largely due to the price of food and non-alcoholic drinks.
  • UK sanctions minister Stephen Doughty has announced a crackdown on sanctions evasion, with two crypto currency exchanges and their director being hit with fresh sanctions over engagement with Russia.
  • The Animal and Plant Health Agency has cautioned that existing BTOM measures and risk-based checks will remain in place, but no further measures are set to come into force.

Statistics:

  • 70% of European imports to the US will be subject to 15% duties under the new agreement.
  • 15% is the cap on tariffs for EU pharmaceuticals, lumber, and semiconductors.
  • 27.5% is the current tariff rate on automotive goods that will fall to 15% if the EU agrees to remove tariffs on US industrial goods.
  • 15% is the new tariff rate on soy sauce and other food products.
  • 0.3% is the contraction in the German economy in Q2, deeper than the 0.1% contraction estimated last month.
  • 3.8% is the UK's inflation rate, the highest level since January 2024.
  • 1,450 is the number of employees at Liberty Steel's South Yorkshire site.
  • 29 August is the date by which the US de minimis exemption for low-value items will close.

Sources:

  • "UK Steel welcomes government support for Liberty Steel", UK Steel press release
  • "EU and US reach framework agreement on tariffs", Politico
  • "Germany's foreign minister elicits criticism from Beijing over Taiwan comments", European Trade Digest
  • "US tariffs hike Sony PlayStation 5 price by $50", BBC
  • "Nintendo Switch 2 and Mario Kart game price hike due to tariffs", BBC
  • "UK inflation rate jumps to 3.8% in June", Office for National Statistics
  • "EU and US trade tensions escalate", The Institute of Export and International Trade press release.

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