U.S.-EU Trade Framework Agreement Revealed

By Jan Strupczewski, Philip Blenkinsop, Julia Payne, and Kate Abnett

BRUSSELS, July 29 (Reuters) – After prolonged negotiations, the United States and the European Union have reached a groundbreaking trade deal intended to alleviate apprehensions for both industries and consumers across the Atlantic.

Main Elements of the Agreement

The details of the agreement, set to take effect on August 1 through an executive order issued by President Trump, will be clarified in an upcoming joint statement from both parties.

Baseline Tariff Rate

Effective immediately, nearly all EU goods entering the U.S. will face a 15% baseline tariff. This tariff is distinct from existing rates and aims to streamline trade operations.

Automobility Adjustments

The agreement stipulates that cars and car parts will now be subjected to a reduced 15% tariff, moving down from the previous 27.5%. In response, the EU will eliminate remaining minor tariffs on U.S. industrial goods, specifically lowering car import duties from 10% to the U.S. level of 2.5%.

Pharmaceuticals and Semiconductors

According to White House officials, EU pharmaceuticals and microchips will also be impacted, facing a 15% tariff. However, this will only be implemented after the U.S. concludes its Section 232 investigations in the upcoming weeks.

Other Key Sectors

Alongside tariffs on pharmaceuticals and semiconductors, the U.S. is conducting national security investigations affecting multiple sectors, including timber and drones. A maximum tariff of 15% will apply to EU goods in these categories.

Metals Tariff Structure

Current tariffs on European steel and aluminum will remain at 50%, with the same rate applying to copper starting August 1. Both sides are set to negotiate a quota system to replace these tariffs, aimed at enhancing trade efficiency.

Zero-for-Zero Tariffs

The agreement includes provisions for zero-for-zero tariffs on an array of products, notably:

• All aircraft and aviation components
• Selected chemicals
• Certain generic pharmaceuticals
• Equipment for semiconductor manufacturing
• Some agricultural goods (excluding sensitive items like beef and poultry)
• Natural resources and crucial raw materials

Wine and Spirits Discussions

The question of establishing a zero tariff regime for wine and spirits remains under negotiation, albeit with progress particularly regarding spirits.

Agricultural and Fishery Access

The EU is set to grant U.S. access for specific products, including Alaska pollock and Pacific salmon, but this will be regulated by quotas. Additionally, improvements in access for U.S. soybean oil and processed food products have been agreed upon.

Strategic Purchases Commitment

The EU has committed to undertake $750 billion in strategic purchases of oil, liquefied natural gas (LNG), and nuclear technology during Trump’s administration, in response to Europe’s energy needs.

Investment Opportunities

European enterprises are expected to invest $600 billion in the U.S. for goods and services over the next term, showcasing robust transatlantic economic cooperation.

Defense Procurement Initiatives

The agreement doesn’t specify a monetary amount, but EU member states will engage in purchases of U.S. military equipment, driven by security considerations.

Cooperation on Safety Standards

Lastly, the agreement highlights a collaborative effort between the U.S. and EU to align automotive and food safety standards while maintaining current regulations.

In summary, this trade agreement signals a significant step forward in U.S.-EU relations, promising a more structured and less uncertain trade environment. Continuous monitoring and negotiations will be essential for both sides to effectively implement and adapt to the outlined agreements.

(Reporting by Jan Strupczewski, Philip Blenkinsop, Julia Payne, and Kate Abnett; Edited by Richard Lough, Joe Bavier, and Ros Russell)