EU Awaits Further Instructions from Trump Regarding Sector-specific Tariffs, Particularly in the Automobile Industry
The European Union (EU) and the United States have announced a new trade framework deal, which includes a 15% tariff ceiling on EU exports to the U.S. that are subject to reciprocal tariffs, such as cars and car parts. However, the deal does not remove existing high tariffs on EU steel, aluminum, and copper, which remain at 50%.
One of the key aspects of the deal is the elimination of duties on all aircraft and aircraft parts between the EU and the U.S. This zero-for-zero tariff agreement is not part of U.S. President Donald Trump's Thursday order and has not yet been fully enacted.
The framework deal also addresses non-tariff barriers in food and agricultural trade, such as streamlining sanitary certificate requirements for U.S. pork and dairy products. It maintains zero customs duties on electronic transmissions, ensuring no network usage fees in digital trade. The EU has committed to buying an additional $750 billion in U.S. energy products over three years and to invest $600 billion in various sectors in the U.S. by 2029.
There are some conflicting versions between the EU and U.S. on details, especially on pharmaceutical tariffs. The U.S. claims pharmaceuticals will face the 15% tariff starting August 1, while the EU says pharmaceuticals remain at 0% pending a U.S. investigation. The exact mechanics of the tariff quota system on steel and aluminum remain unsettled.
U.S. President Donald Trump's executive order sets out a 15% reciprocal tariff for the EU, not including cars and car parts. The order, which takes effect on August 7, does not apply to the agreed carve-outs. EU exports of car and car parts to the U.S. currently face a 27.5% tariff, with 25% of it due to Section 232.
Further detailed orders are expected to follow from President Trump. It is important to note that the framework deal on trade between the EU and the U.S., which includes the elimination of duties on all aircraft and aircraft parts, is not fully encompassed by Trump's Thursday order. The zero-for-zero tariffs on all aircraft and aircraft parts between the EU and the U.S., as part of the framework deal, are not yet enacted by Trump's Thursday order.
In summary, the EU-U.S. trade framework deal establishes a 15% tariff cap on vehicles and other EU exports to the U.S., includes tariff quotas on steel and aluminum, maintains zero tariffs on digital transmissions, and commits to large U.S. energy purchases and investments by the EU. However, some details, such as the implementation of zero-for-zero tariffs on all aircraft and aircraft parts and the exact tariff rates for pharmaceuticals, remain unresolved.
- The European Union (EU) and the United States have not yet fully enacted the zero-for-zero tariff agreement on aircraft and aircraft parts, despite it being a key aspect of the new trade framework deal.
- The EU and U.S. trade framework deal maintains zero tariffs on digital transmissions, but the tariff rates for pharmaceuticals are still unresolved, with conflicting versions between the two parties.
