The US and EU are poised to agree a tariff trade deal that would mirror the one struck earlier this week by Japan.
A 15% tariff rate appears to be settled on by negotiators, according to reporting by the Guardian. It would be half the rate that was planned for the 1 August implementation date, which would have seen 30% duties levied on all EU goods. The European Commission delivered news of the proposed deal to EU member states yesterday.
Concessions
In return for the reduced rate, the EU has agreed to cut the most-favoured nation (MFN) duty rate to zero for some US products entering the bloc. This concession did not secure a long-term commitment to the 10% ‘baseline’ rate the bloc’s exports to the US currently face, however.
As we reported yesterday, officials from the EU’s two largest economies, France and Germany, have been mulling the possibility of hitting back at the US with restrictive measures on trade, should president Donald Trump fail to sign an agreement on tariff reduction before 1 August.
An anonymous EU diplomat told the FT that the deal between the US and Japan, which also settled on a 15% levy, had reframed the bloc’s talks with the North American nation. It had “made clear the terms of the shakedown,” they said, adding that most member states of the EU “are holding their noses and could take this deal”.
Japan deal context
That thought is echoed by Alex Jacquez, a policy expert with research firm Groundwork Collaborative, who told CBS News that “the Japan deal solidifies this pattern we've seen thus far, which is some market access relief, a commitment to purchase US goods, and a slightly lower, but above the universal baseline, tariff level”.
"The Japan deal certainly provides a framework of what [Trump] looking for. It's about accepting a baseline tariff at or above 10%, and then making purchase commitments.”
There could be specific carve-outs and exemptions for certain industries in the EU’s draft deal, including for spirits, aircraft and medical devices – the latter of which is a source of ongoing hostility between the EU and China, on display at a summit between the two today where Chinese leader Xi Jinping warned against erecting trade barriers.
‘Fumbled its hand’?
The deal would forestall the use of the ‘anti-coercion instrument’, which would allow the EU to place restrictions on imports and public procurement for US firms.
Tobias Gehrke, senior policy fellow at the European Council on Foreign Relations think tank, told the Guardian that there is a sense among some that the EU had not fully exploited the possibilities available to it in negotiations.
“There is a sense that the bloc has fumbled its hand, despite holding decent cards. The EU should have immediately retaliated against US tariffs. While the mantra ‘negotiate from a position of strength’ was oft-repeated in speeches, any associated actions never materialised.”
