On 27 July, European Commission President Ursula von der Leyen and US President Donald Trump struck a handshake over the EU-US trade deal. On 21 August, Commissioner for Trade Maroš Šefčovič presented a Joint Statement on a US-EU framework on an agreement to put their future trade and investment relationship ‘on a solid footing’. The agreement contains a large number of projects and is intended to be a first step in a process ‘that can be further expanded over time’.

Imbalances in customs policy

The EU pledges to eliminate its tariffs on all US industrial goods and to provide the US preferential market access, i.e. better conditions than for other trading partners, for a wide range of seafood and agricultural goods. Conversely, the US will impose a tariff rate of at least fifteen percent. However, if the Most Favoured Nation (MFN) tariff rate is higher, it will continue to apply to the EU. For unavailable natural resources (including cork), aircraft, aircraft parts and generics, the MFN-tariff is zero or close to zero and should remain the same for the EU. This list is to be expanded.

Pharmaceuticals, semiconductors and lumber from the EU should again be subject to a tariff rate of no more than 15 percent. With regard to automobile and automobile parts, it has been agreed that the US will also limit its tariffs to 15 percent if the EU implements the tariff cuts it has announced. Commissioner Šefčovič has already taken the appropriate steps with two legislative proposals. Now the EU Parliament is on the move. However, this is very critical of the deal and can also veto it. In the case of steel, aluminium and their derivative products in particular, the EU had hoped for a much better solution, especially since the tariff rate there should be 50 percent. In this area, the only solution announced is cooperation to curb overcapacity and secure supply chains.

Targeting non-tariff barriers to trade, EU commitment to investment in the US

Close cooperation is envisaged on the removal of non-tariff barriers to trade, in particular in the energy, automobiles, food and agricultural products sectors. This mainly concerns acceptance of trading partners' standards and regulations, which often involves aligning with low standards, and thus the approval of the affected products for import. Cooperation between standards development organisations will also be improved and the conformity assessments to cover additional industrial sectors will be facilitated. Similarly, the recognition of U.S. conformity assessment bodies related to requirements for telecommunication equipment, including cybersecurity, has been agreed. A separate agreement will be negotiated in this area.

By 2028, the EU intends to procure liquefied natural gas, oil and nuclear energy products worth 750 US-Dollar and to purchase AI chips worth at least 40 billion US-Dollar for its computing centres. EU companies are expected to invest an additional $600 billion in US strategic sectors by 2028. In addition, EU procurement of US military and defence equipment is expected to increase significantly.

EU regulatory projects under pressure

The EU announces that it will address concerns in the US about the EU Deforestation Regulation and provide additional flexibility regarding the Carbon Border Adjustment Mechanism (CBAM). The Corporate Sustainability Due Diligence Directive (CSDDD) and Corporate Sustainability Reporting (CSRD) are also being targeted, which are already under massive pressure in the course of the Sustainability Omnibus. They are not intended to constitute ‘undue restrictions’ on transatlantic trade. Administrative burdens and liability risks for U.S. companies are to be reduced.

Rules in an international context

In addition, the EU and the US commit to step up their cooperation on export restrictions on critical mineral and similar resources by third countries and to discuss high standards for the protection and enforcement of intellectual property rights. The two trading partners also seek closer cooperation on the protection of internationally recognised labour rights, in particular with regard to the elimination of forced labour in supply chains. The aim is also to strengthen economic security, make supply chains more resilient and foster innovation.

Digitalisation is already being challenged

The statement also addresses ‘unjustified digital trade barriers’ without directly addressing the Digital Markets and Digital Services Act. In the meantime, however, Donald Trump has again announced tariffs due to the corresponding EU regulation in the digital sector. Irrespective of this, the EU confirms that it ‘will not adopt or maintain network usage fees’. No customs duties on electronic transmissions (e.g. software downloads) are to be levied on both sides. The multilateral moratorium on such duties at the WTO should be supported and a permanent multilateral commitment should be sought. The EU also announces to consult US traders on the digitalisation of trade procedures and the implementation of the proposed ‘EU Customs Reform’.

Fierce debates and criticism

Ursula von der Leyen points out that the deal deliberately opted for stability and predictability and that further retaliatory tariffs would harm workers, consumers and industry even more. She responded to a criticism by former ECB President Mario Draghi, who complained about the tariffs imposed by the largest trading partner and long-standing ally. Draghi said the EU had also given in to US pressure to weaken legislative acts on supply chains, sustainability reporting and deforestation.

Bernd Lange, the Chair of the International Trade Committee (INTA) in the EU Parliament, also points to the imbalance of the agreement and the resulting competitive advantage for the USA: "In a nutshell, European industrial goods are subject to customs duties of at least 15 percent in the US, while American products enter the EU at 0 per cent." In particular, the tariff on steel and aluminium is horrendous. The agreement also contradicts WTO principles and weakens the rules-based trading system. "We will examine these proposals very carefully", said Lange. He also pointed out that the "deal" in this form is not legally binding and should not be considered as a normal trade agreement. Overall, the "deal" was strongly criticised at the most recent INTA meeting on 3 September.

There are also concerns from the ETUC about the imbalance. ETUC Secretary General Esther Lynch added: "It is a matter of concern to workers that the deal does not take into account the impact on jobs and flanking measures to support good jobs creation in Europe are not foreseen alongside this agreement to cushion its effects."

Further Information:

EU Commission: Joint Statement on a United States-European Union framework on an agreement on reciprocal, fair and balanced trade
EU Commission: EU proposes tariff reductions to implement EU-US deal
AK EUROPA: Sustainability Omnibus. Simplification of the Corporate Sustainability Due Diligence Directive or undermining human rights obligations?
MdEP Bernd Lange: Ein „Deal“ ist kein Abkommen