The EU and US have detailed their agreed-upon tariff deal, elaborating on the 15pc cap on EU exports and announcing purchase commitments.
Global economies scrambled to first make sense, and then make deals with the US, after president Donald Trump announced his “reciprocal tariffs” earlier this year.
The list of government bodies that did manage to come to a consensus with the US includes the European Union, which announced that it had reached a “single 15pc tariff rate for the vast majority” of exports from the area to the US.
While the announcement was made late last month, details surrounding the deal have been sparse – causing fresh confusion when Trump announced an “approximately 100pc” tariff on semiconductors earlier this month.
Today (21 August), the two regions have finally put to paper the details of the agreed-upon tariff trade deal. Here’s what you need to know.
Chips, pharma tariff capped at 15pc
Detailing what was announced last month, the EU and US have confirmed a maximum, all-inclusive 15pc tariff ceiling for EU products subject to the reciprocal tariffs. No additional tariffs will apply on products which are already subject to the US ‘Most Favoured Nation’ (MFN) tariffs equal to or above 15pc.
The US has committed to ensure that EU exports on pharmaceuticals and semiconductors are included in the 15pc tariff ceiling, regardless of the conclusion of the Section 232 investigations. The probe, currently carried by the US administration, looks into the “national security risks posed by US reliance on imported processed critical minerals and their derivative products”.
From 1 September, the Trump administration has also committed to only apply its MFN tariffs to generic pharmaceuticals, their ingredients and chemical precursors, as well as aircraft and aircraft parts from the EU. The two have agreed to consider other industries that would be added to the MFN tariffs list.
Apart from the EU, only Canada and Mexico have drawn up a similar tariff deal with the US, where the reciprocal tariffs do not apply on top of existing MFN tariffs of a certain rate.
While on the other hand, the EU said it will eliminate tariffs on industrial goods imported from the US and improving market access for a wide range of US seafood and agricultural goods.
Easing regulation for US businesses
In return for capping its tariffs at 15pc, the EU has made several purchase commitments to the US, as well as promising to reduce regulatory barriers for US businesses in the region.
The EU will be purchasing US liquified natural gas, oil and nuclear energy products valued at $750bn through 2028. The EU has also committed to purchasing at least $40bn worth of US AI chips for its computing centres, and the two have promised to work together to maintain tech security to avoid information leakage to “destinations of concern”.
European companies are expected to invest an additional $600bn across strategic sectors in the US through 2028. In addition, the region also plans to “substantially increase” procurement of military and defence equipment from the US.
While on the regulatory side of things, the EU said it will address concerns from US producers and exporters regarding its deforestation regulation to avoid “undue impact” on US-EU trade.
The region also promised to increase exceptions and provide additional flexibilities when it comes to implementing its Carbon Border Adjustment Mechanism – a carbon tariff – on US SMEs.
In addition, the EU has committed to ensuring that the Corporate Sustainability Due Diligence Directive and the Corporate Sustainability Reporting Directive “do not pose undue restrictions on transatlantic trade”.
According to the EU, the deal “safeguards” EU exports into the US in a situation where the US has increased tariffs on all its imports. “The necessary space has also been created to further engage with the US on improving market access conditions across the Atlantic, including by further lowering of tariffs for additional sectors or working together on addressing non-tariff barriers,” the Commission added.
“The European Union will always pursue the best outcomes for its citizens and businesses. Faced with a challenging situation, we have delivered for our member states and industry and restored clarity and coherence to transatlantic trade,” said European Commission president Ursula von der Leyen.
“This is not the end of the process, we continue to engage with the US to agree more tariff reductions, to identify more areas of cooperation, and to create more economic growth potential. At the same time, we continue to diversify our international trade partnerships, creating EU jobs and prosperity.” The Commission has said that it will begin implementing the main aspects of the deal.
Don’t miss out on the knowledge you need to succeed. Sign up for the Daily Brief, Silicon Republic’s digest of need-to-know sci-tech news.
