The landmark trade deal between European Union and the United States was reached on Sunday. Under this trade agreement, most EU goods will now be subject to 15 percent tariffs.
US President Donald Trump and President of the European Commission Ursula von der Leyen finally agreed to a trade deal after weeks of negotiations. The two leaders met at Trump’s gold course in Turnberry, Scotland on Sunday.
While von der Leyen said the deal will “rebalance, but enable trade on both sides,” Trump declared it was a “very big deal, biggest of all.”
The 15 percent tariff baseline eliminated Trump’s 30 percent tariff threat, which peered over the EU’s shoulder in case an agreement wasn’t reached by Aug 1. However, many aspects of the deal are still not known.
Goods entering the US from the 27-nation bloc will be affected by the proposed import taxes. It will have an impact on computer chips, cars, and pharmaceuticals.
According to Trump, the EU has committed to invest $600 billion more than it now does in the US, buy $750 billion worth of US energy, and purchase significant amount of military equipment. He said that US exporters “have the opening up of all of the European countries” because tariffs “for automobiles and everything else being a straight across tariff of 15%.”
Von der Leyen said that “basically the European market is open” and that the 15 percent tariffs were “across the board, all inclusive.”
At a press conference, she said that the additional $750 billion in US energy purchases would be spread out over the following three years and would lessen the bloc’s reliance on Russian natural gas.
“When the European Union and the United States work together as partners, the benefits are tangible,” Von der Leyen said. She added that the trade agreement “stabilized on a single, 15% tariff rate for the vast majority of EU exports” including cars, semiconductors and pharmaceuticals.
“15% is a clear ceiling,” she said.
By stating that both parties agreed on “zero for zero tariffs on a number of strategic products,” such as all aircraft and component parts, certain chemicals, certain generic drugs, semiconductor equipment, some agricultural products, natural resources, and critical raw materials, von der Leyen also made it clear that such a rate would not apply to everything.
However, it is unclear if alcohol will be included in that list.
Since the European Commission manages trade for member nations, von der Leyen was mandated to negotiate. There will be other fronts to work on, in the meanwhile. The trade deal must now be presented by the Commission to EU lawmakers and member states, who will ultimately decide whether to approve it.
Meanwhile, the import data from the previous year provide insight into the enormous scale of the trade relationship between the EU and the US. According to the New York Times, the EU accounted for about $610 billion of the $3.3 trillion in goods that the US imported. Furthermore, according to the Associated Press, 44 percent of the world economy is made up of both sides.