US and EU Reach Trade Agreement, Maintain High Tariffs Until E.U. Takes Steps to Lower Levies

Strategic Insights -

Washington will maintain high tariffs on vehicles imported from the bloc until the E.U. takes steps to lower its levies on many American products. The United States and the European Union agreed to a trade deal, outlining terms that will see Washington maintain high tariffs on European vehicles until the 27-nation bloc takes steps to lower its levies on many American industrial and agricultural products. This agreement is a step toward solidifying promises made in July, which averted a damaging tit-for-tat escalation in President Trump's global trade war. However, the deal is not a legally enforceable pact, but rather a first step toward one.

Key Takeaways:

  • The United States will maintain a 15 percent tariff on most goods arriving from E.U. member countries, with some pharmaceuticals taxed at 15 percent even after the expected set of tariffs for foreign-made medicines could be as high as 200 percent.
  • The U.S. will lower tariffs on European vehicles to 15 percent only after the E.U. takes steps to follow through on its commitments to lower tariffs on imported American goods, specifically on industrial goods and agricultural products.
  • The E.U. must "formally" introduce legislation that would relax duties on these products before lower car levies will kick in.
  • The delay could upset European automakers, which have faced steep financial losses due to America's high car tariffs.
  • European officials hope to start the legislative process this month, with lower car tariffs to be counted as having started on Aug. 1.
  • The agreement acknowledges that the deal is "a first step in a process that can be further expanded over time to cover additional areas."
  • Economists say the deal contains some positive provisions for U.S. businesses, but that the higher tariffs will result in billions of dollars of additional costs for U.S. households.
  • The deal does not address wine and spirits tariffs, with taxes on these imports remaining at 15 percent.
  • The U.S. and E.U. officials agreed to continue discussions on a vast array of thorny trade issues, including adjustments to auto and emissions standards and a reduction in regulations on U.S. technology companies.
  • The White House continues to push for E.U. officials to weaken digital regulations, criticizing them for going too far to censor content and for causing undue burden to American technology companies.
  • Industry groups praised the arrangement, welcoming commitments to address longstanding trade issues and urging governments to continue removing digital trade barriers.

Statistics:

  • 15 percent tariff on most goods arriving from E.U. member countries.
  • Tariffs on European vehicles currently set to 27.5 percent.
  • Lower tariffs on European vehicles will kick in only after the E.U. takes steps to follow through on its commitments to lower tariffs on imported American goods.
  • E.U. must "formally" introduce legislation that would relax duties on industrial goods and agricultural products, including bison, tree nuts, dairy, and many types of seafood.
  • Tariffs on foreign-made medicines could be as high as 200 percent.
  • U.S. households will face billions of dollars of additional costs due to higher tariffs.
  • European automakers have faced steep financial losses due to America's high car tariffs.
  • U.S. and E.U. officials agreed to continue discussions on a vast array of thorny trade issues, including adjustments to auto and emissions standards and a reduction in regulations on U.S. technology companies.

Sources:

  • The New York Times
  • Reuters
  • The European Union
  • The United States
  • Ana Swanson