United States, European Union Release Additional Details Regarding Trade Agreement

As Connecting the Dots reported at the time, on July 27, President Donald Trump announced the United States had reached a trade agreement with the European Union (EU) that would impose a 15 percent tariff rate on most U.S. imports of EU products and that called for the EU to buy more than $750 billion worth of U.S. energy and invest an additional $600 billion in the United States. In a joint statement issued on Aug. 21, the two governments released additional details about the agreement.

According to Bloomberg Government (subscription required), those details open the “prospect for discounted rates on some steel, aluminum and derivative products under a quota system … a shift from the White House’s stated plans in July, when the Trump administration insisted those metal tariffs would remain at 50 percent.”

More specifically, the White House said that included in the terms of the agreement are promises that:

• With respect to steel, aluminum, and their derivative products, the U.S. government and the EU will consider whether to cooperate on ring-fencing their respective domestic markets from overcapacity while ensuring secure supply chains between each other, including through tariff-rate quota solutions;
• The EU will eliminate tariffs on all U.S. industrial goods and provide preferential market access for a wide range of U.S. seafood and agricultural goods;
• The U.S. government and EU will strengthen economic security alignment to enhance supply chain resilience and innovation by taking complementary actions to address non-market policies of third parties and to cooperate on inbound and outbound investment reviews and export controls, as well as duty evasion;
• The U.S. government and EU will work together to reduce or eliminate non-tariff barriers and to strengthen cooperation and action related to the imposition of export restrictions on critical mineral and other similar resources by third countries;
• The EU will “substantially increase” procurement of military and defense equipment from the United States;
• The U.S. government will apply the higher of either the U.S. Most Favored Nation (MFN) tariff rate or a tariff rate of 15 percent, comprised of the MFN tariff and a reciprocal tariff, on originating goods of the European Union;
• The U.S. government will apply only the MFN tariff to the following EU products: unavailable natural resources (including cork), all aircraft and aircraft parts, and generic pharmaceuticals and their ingredients and chemical precursors;
• The U.S. government will “promptly ensure” that the tariff rate, comprised of the MFN tariff and Section 232 tariffs for pharmaceuticals, semiconductors, and lumber, does not exceed 15 percent;
• Once the EU formally introduces the necessary legislative proposal to enact the tariff reductions under the agreement, the U.S. government will reduce tariffs on automobiles and automobile parts originating from the EU and subject to Section 232 tariffs. Once enacted, that change will mean:
  • No Section 232 automobile or automobile parts tariffs will apply to covered EU goods with an MFN tariff of 15 percent or higher; and
  • For covered goods with an MFN rate lower than 15 percent, a combined rate of 15 percent, comprised of the MFN tariff and Section 232 automobile tariffs, will be applied.