In a significant shift, US President Donald Trump has decided to back down from imposing extraordinarily high tariffs on pharmaceuticals and semiconductors imported from the European Union. This decision comes in the wake of a recent announcement regarding the US-EU trade deal, which was initially discussed last month during a meeting between Trump and European Commission President Ursula von der Leyen in Scotland.
Initially, Trump had indicated that pharmaceuticals and semiconductors would be excluded from the trade agreement, potentially leading to tariff rates as high as 250% for pharmaceuticals and 100% for semiconductors. However, fresh details released about the US-EU agreement now reveal that tariffs on these sectors will be capped at 15%, aligning them with most other sectors covered in the deal. This compromise is seen as a crucial step towards fostering better trade relations between the US and the EU.
According to the agreement, the EU must first pass legislation to reduce US export tariffs to zero before the 27.5% tariffs on car exports can be lowered to 15%. A joint statement from the US and EU emphasized that this initial agreement is just the beginning of a broader process that can evolve as trade relations develop.
Irish officials expressed relief over the confirmation that tariffs on pharmaceuticals and semiconductors would be limited to 15%. Simon Harris, Ireland's Deputy Prime Minister and Foreign Minister, stated that this offers crucial protection to Irish exporters, who could have faced much higher tariffs. He added, "Our intention now is to see what other carve outs can be made in areas of interest for Irish exporters."
The 15% tariff rate on most European goods, including semiconductor and lumber exports, will be effective from September 1. In return, the EU has agreed to eliminate tariffs on all US industrial goods, including various agricultural products like fresh fruits, vegetables, and meats. However, the reduction of the 27.5% tariff on European motor vehicle exports to 15% hinges on the EU's legislative action to lower tariffs on US exports.
EU Trade Commissioner Maros Sefcovic highlighted that the agreement stipulates the 15% tariff on cars will be retroactively applied from the beginning of the month in which legislative procedures commence. Sefcovic conveyed optimism about starting the legislative process promptly, receiving assurances from the US that the lower tariff would be effective from August 1.
Ursula von der Leyen emphasized that this trade deal brings predictability and stability to the largest trading partnership in the world. She remarked, "This EU-US trade deal delivers for our citizens and companies, and strengthens transatlantic relations." Meanwhile, US Secretary of Commerce Howard Lutnick described the deal as a historic opportunity for American producers to access the vast European markets, reinforcing the America First Trade Agenda.
Despite the positive aspects of the agreement, there remains disappointment on both sides regarding the exclusion of wine and spirits from tariff exemptions. The French wine exporters federation (FEVS) expressed concerns that this would create significant challenges for the sector, while the Distilled Spirits Council in the US voiced similar sentiments, stating that the lack of a permanent return to zero tariffs on spirits would hinder future growth.
In conclusion, while the US-EU trade deal marks a crucial step towards improved trade relations, ongoing negotiations and legislative actions will determine the future landscape of tariffs and trade between these two economic giants.
