US EU Tariff Deal: 15% Agreement Nears
EU Poised to Accept 15% Reciprocal Tariffs to Avert Trade War with US
Brussels is reportedly close to agreeing to reciprocal levies of 15% to sidestep a potential escalation of trade tensions with the United States, a move described by one diplomat as a ”shakedown” that most member states are reluctantly accepting.
The European Union is reportedly preparing to agree to reciprocal tariffs of 15% with the United States, a move aimed at avoiding President Trump’s threat to raise these levies to 30% from August 1st. This prospective deal, which would see both sides waive tariffs on certain products including aircraft, spirits, and medical devices, has been met with a degree of resignation within the EU, with one diplomat noting that ”most member states are holding their noses and could take this deal.”
The European Commission, responsible for the EU’s trade policy, briefed member state envoys on Wednesday following discussions with their US counterparts. The news of this potential agreement has already had a positive impact on financial markets, with the euro recouping earlier losses to trade flat against the dollar, and US stocks extending their gains, with the S&P 500 rising by 0.6%.
The Terms of the Deal and EU’s Position
Under the proposed agreement,the 15% minimum tariff is understood to encompass existing duties. This means that for sectors like the automotive industry, where tariffs currently stand at 27.5%, the rate would effectively fall to 15%. This outcome is viewed by Brussels as a way of cementing the current trade status quo, thereby averting a more damaging trade war.
The deal struck between the US and Japan, which reportedly set a tariff rate at 15%, is understood to have been a important factor in pushing Brussels towards a grudging acceptance of a higher reciprocal tariff rate. This move is seen as a pragmatic approach to avoid the possibly severe economic consequences of a full-blown trade dispute.
EU’s Contingency Plans and Retaliatory Measures
despite the progress towards an agreement, the EU has made it clear that it retains the option to retaliate should Mr. Trump attempt to push for further concessions or follow through on his threat to increase reciprocal duties to 30%.
One of the key tools in the EU’s arsenal is its anti-coercion instrument (ACI), often referred to as its “trade bazooka.” This instrument, which has never been used before, would grant Brussels the authority to block US companies from public tenders, revoke intellectual property protection, and impose restrictions on imports and exports.
Furthermore, the bloc has been preparing a potential package of retaliatory tariffs, estimated to be worth €93 billion and set at up to 30%, in case an agreement could not be reached by the August 1st deadline. This demonstrates the EU’s readiness to defend its economic interests if negotiations fail.
A US official has indicated that the situation remains fluid and subject to change, underscoring the ongoing nature of these high-stakes trade discussions.
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