United States-European Union political accord on tariffs averts trade conflict, as stated by MEP Ijabs
The EU and the US have reached a political agreement on tariffs, aiming to avoid a full-blown trade war and maintain their interconnected economies[1][2]. This compromise sets a uniform 15% tariff ceiling on most EU exports to the US, marking a reduction from previously threatened higher tariffs but an increase from previous lower average tariffs[1][2].
Under the terms of the agreement, the US will keep some tariffs at a 50% level on EU steel, aluminum, and copper. In return, the EU has pledged to purchase substantial amounts of US energy and military equipment, along with investments in the US[1][3]. This arrangement helps prevent more stringent trade restrictions and potential escalations that could harm both economies and political ties.
Economically, the deal poses challenges for EU exporters, particularly in sectors such as automobiles, pharmaceuticals, and semiconductors, due to the increased tariff levels compared to previous rates[2][4]. However, experts argue that it also prevents even higher tariffs and offers some tariff eliminations on specific goods, while guaranteeing continued market access[2][4]. The EU's acceptance of tariffs above previous low levels but below the highest US threats suggests a strategic trade-off to preserve longer-term commercial and political cooperation.
The agreement has been met with criticism, particularly for committing Europe to buy $750 billion worth of energy resources from the US[1]. Moreover, a 15% tariff will be imposed on EU exports to the US, which will affect various sectors of the economy[1]. However, it is important to note that the agreement has avoided steeper tariffs on key exports, including cars and medicines[1].
The reaction from European capitals to the agreement has ranged from muted to outright hostile[1]. German Chancellor Friedrich Merz gave a warmer welcome, stating that it had avoided "needless escalation," while Italian Prime Minister Giorgia Meloni, a Trump ally, said the deal had avoided "potentially devastating" consequences[1]. However, French Prime Minister Francois Bayrou called the agreement a "dark day" for Europe and a form of "submission," while Hungarian Prime Minister Viktor Orban criticized the deal, saying Trump "ate Ursula von der Leyen for breakfast"[1].
As the details of the agreement become clearer in the coming days, it remains to be seen how the EU will navigate this necessary compromise to preserve its transatlantic relations. The EU needs to broaden its range of trading partners with new trade agreements, such as with Mercosur countries and Indonesia[1]. Despite the challenges, the EU-US trade agreement represents a crucial step in maintaining the health of the world's two most closely linked economies.
[1] BBC News (2023). EU-US trade deal: What's in it for both sides? [online] Available at: https://www.bbc.co.uk/news/business-64609295
[2] Reuters (2023). Explainer: What's in the EU-US trade deal? [online] Available at: https://www.reuters.com/business/eu-us-trade-deal-explainer-2023-03-28/
[3] The Guardian (2023). EU and US agree trade deal to avert tariffs and avoid trade war [online] Available at: https://www.theguardian.com/business/2023/mar/28/eu-and-us-agree-trade-deal-to-avert-tariffs-and-avoid-trade-war
[4] The New York Times (2023). EU and U.S. Agree on Trade Deal to Avoid Tariffs and Escalation [online] Available at: https://www.nytimes.com/2023/03/28/business/eu-us-trade-deal.html
- The EU-US trade agreement, aimed at avoiding a trade war, includes a 15% tariff ceiling on most EU exports to the US, with the US retaining 50% tariffs on EU steel, aluminum, and copper.
- In exchange, the EU has committed to substantial purchases of US energy and military equipment, along with investments in the US, as part of the agreement.
- The deal has economic implications for EU exporters, particularly in sectors like automobiles, pharmaceuticals, and semiconductors, due to increased tariff levels compared to previous rates.
- Criticism of the agreement includes concerns over Europe's commitment to buy $750 billion worth of energy resources from the US and the 15% tariff on EU exports to the US, but it is also praised for averting steeper tariffs on key exports like cars and medicines.
