EU and US finally issue joint statement on trade deal

On July 27, European Commission President Ursula von der Leyen and US President Donald Trump reached a political agreement on a trade deal. In short, the US will impose a 15 percent tariff on virtually all imports from the EU.

This comes after Trump previously threatened much higher tariffs. This is a relief for the important European automotive sector, which now faces tariffs of 27.5 percent.

To persuade the US to set tariffs at 15 percent, the EU promised to lower its own import duties on industrial goods to zero and ease rules so Americans could export more agricultural and fishing goods to Europe.

Moreover, the EU claims to "intend" to invest an additional $600 billion in the US and purchase $750 billion worth of LNG, oil, coal, and nuclear fuel over the next three years. Experts quickly dismissed this commitment, which is not the European Commission's responsibility.

Yet it took almost a month before the two parties could actually issue a joint statement on the details of the deal. It's noteworthy that the European auto industry will continue to face the high tariffs for a while.

Until now, the European automakers' association assumed the tariff reduction would take effect once the joint statement was finalized, but that's not the case. It now appears the reduction will only take effect once the European Commission presents its legislative proposals to eliminate tariffs on US industrial goods.

ACEA, the European Automobile Manufacturers' Association, is generally moderately optimistic, primarily because there is now clarity. However, this does require encouragement. "It is now crucial that the Commission immediately implements the EU's commitments, thus mitigating the impact of the tariffs that are already costing car manufacturers millions of euros a day in import duties," ACEA stated.

Work is also underway to develop a list of goods on which the US will not impose import duties or will apply significantly reduced tariffs. These include, for example, aircraft, generic medicines, and cork.

The hope in Brussels was to expand this list, for example, to include alcoholic products (wine, whiskey, champagne). According to the statement, this is still being worked on, but not much progress has been made yet.

Although von der Leyen described the agreement last month in Trumpian terms as "a huge deal," it is no secret that the EU had hoped for a better outcome.

Brussels hoped to reach an agreement with the US in which both parties would pledge to lower their tariffs compared to the previous situation, before Trump took office. In that light, the 15 percent tariff on EU goods is disappointing.

The positive side, according to the EU, is that there is now clarity and stability and that the EU, compared to many other countries, has managed to conclude a better deal.

Rabobank economist Elwin de Groot also concludes that there is now somewhat more clarity, which is positive for businesses. However, he notes that the 15 percent tariffs will ultimately hurt the export sector.