US-EU Trade Deal Averts Tariff War, Boosts Auto, Pharma Sectors
The United States and European Union have struck a trade agreement, averting a potential transatlantic trade war. The deal, announced ahead of the 1 August 'Liberation Day' tariff deadline, imposes a 15% tariff on most goods, replacing the previously threatened 30% baseline tariff. This move is expected to benefit various European sectors, including automobile manufacturers and suppliers, aircraft and pharmaceutical industries, and certain raw material producers.
European automobile giants like BMW, Mercedes-Benz, and Porsche stand to gain significantly from reduced tariffs on cars and auto parts, now cut from 27.5% to 15%. This reduction enhances their competitiveness and provides planning certainty in the US market. Other sectors poised to profit include aircraft and aircraft parts, pharmaceuticals (generics and components), and specific raw materials such as cork, all benefiting from tariff reductions and exemptions on US additional duties.
Had punitive tariffs continued, European producers like Heineken and EssilorLuxottica, along with automakers across the region, would have faced significant challenges. The agreement also commits the EU to invest approximately $600 billion in the United States over the coming years. Analysts anticipate that other major economies may now seek similar trade arrangements with the US. The EU remains the US's largest trading partner, with top exports including automobiles, pharmaceutical products, and aircraft and aerospace components.
The new trade agreement between the US and EU has been welcomed by financial markets, with European and US equities rising sharply following the news. As part of the deal, the EU has agreed to purchase $750 billion worth of American energy over a three-year period. Most goods traded between the two blocs will now be subject to a uniform 15% tariff, with several categories excluded, such as aircraft and components, selected chemicals, some agricultural goods, certain generic pharmaceuticals, critical raw materials, and semiconductor equipment. The US will maintain a 50% tariff on steel and aluminium, which remains outside the new agreement's scope.
