"Criticism Mounts Over Hefty Impact - Customs Agreement Under Scrutiny"
The US and the European Union (EU) have reached a landmark trade agreement, setting a base tariff rate of 15% on most EU imports into the USA. This development, however, has sparked a mix of reactions from various stakeholders.
The Federation of German Industries and the Association of German Machine and Plant Manufacturers view the agreement as an insufficient compromise, with the 15% tariff on machine imports into the USA being seen as a burden for American manufacturers. The German government, led by Federal Minister of Economics Katherina Reiche, defends the agreement, acknowledging that it will require an adjustment for some sectors. Reiche describes the customs deal as a challenge but provides security.
Federal Chancellor Friedrich Merz welcomes the agreement and supports the European Commission in upcoming negotiations over the details of the agreement. Merz believes that both sides benefit from stable and predictable trade relations. However, the German government hopes for further relief on steel and aluminum tariffs.
The French government, led by Prime Minister François Bayrou, has voiced clear criticism, with Bayrou commenting that the agreement is a sad day for an alliance of free peoples. Similar sentiments are echoed by the Green Party faction leader Katharina Dröge, who sees the compromise as a fatal signal and will not achieve stability for international trade policy.
The EU is reportedly ready to eliminate tariffs for US car imports, currently at 10%, but only if the USA reduces its tariffs on car imports from the EU. This could potentially have a positive effect on inflation in both regions.
The trade deal applies to a wide range of products, including cars, semiconductors, and pharmaceutical products. However, the agreement leaves open the possibility for further negotiations, particularly on steel and aluminum tariffs.
Meanwhile, the trade conflict between the USA and China continues, with US Finance Minister Scott Bessent and high-ranking Chinese representatives meeting in Stockholm to negotiate an extension of the current tariff pause. President Emmanuel Macron initially did not make any public statements on the customs deal.
It's important to note that economists, such as Ulrike Malmendier, consider tariffs of 15% to be an "enormous burden for the economy." The potential economic impacts and implications of the tariff include trade distortion and increased costs, negative effects on EU economic growth, sector-specific pressures, US inflation and GDP impact, market and price dynamics, and overall increased market uncertainty.
The net effect is a trade environment less favorable to EU exporters and potentially higher prices for American consumers. While there is no direct quote from Ulrike Malmendier, the consensus among economists is that these impacts are likely.
In the political arena, the Alternative for Germany (AfD) faction leader Alice Weidel criticizes the EU for being brutally taken advantage of in the agreement, while Federal Chancellor Friedrich Merz welcomes it. Deputy government spokesman Sebastian Hille states that further easements on steel and aluminum tariffs would have been desirable.
The US President, meanwhile, wants to use customs revenues to at least partially finance his expensive campaign promise of large tax cuts.
This development in transatlantic trade relations promises to shape the economic landscape for both the USA and the EU in the coming years. As negotiations continue, it remains to be seen how these impacts will unfold and what the final shape of this new trade agreement will be.
The European Central Bank might consider adjusting its monetary policy in response to the anticipated increase in costs for EU imports, potentially affecting the finance sector.
With the prospect of reduced tariffs on US car imports and the potential expansion of the radio industry through more predictable trade relations, some businesses may find opportunities in the revised transatlantic trade agreement.
