Brussels – Reciprocal 15 per cent tariffs on each other’s exports, with an exemption regime on certain types of products, the most sensitive ones: the US and the EU are reportedly close to a trade agreement based on these conditions, which would be a mutually beneficial solution: the EU would avoid an open trade war with the US by limiting the damage compared to the 30 per cent tariffs scenario threatened by the White House, while the US side would bring home a useful result to sell to its public opinion, as well as for its own economy.
According to the agreement reportedly on the table between the European Union and the United States, generalised horizontal 15 per cent tariffs would be applied, similar to the agreement reached between the US and Japan. This is, however, a basic tariff, to which the surcharge under the “Most Favoured Nation” clause (MFN) would still apply. This is a trade tariff under the rules of the World Trade Organisation (WTO) applied to imports from those countries that have a better balance in bilateral trade. The special tariff is calculated net of preferential tariffs under free trade agreements and other schemes or tariffs applied within quotas.
The EU and the US are negotiating the possibility of exemptions for specific products. According to the draft agreement, Europe would be willing to accept a 15 per cent tariff regime, in any case a step back from the 10 per cent flat rate proposal, in exchange for exclusions on sensitive products such as aircraft, alcohol, and medical devices. The automotive sector is crucial, especially for Germany: The European Commission and its Trade Commissioner, Maros Sefcovic, negotiating on behalf of the 27, would like a 15 per cent alignment also for cars, which are currently subject to a 27.5 per cent tariff.
The EU, however, is preparing for the worst, i.e. for the possibility of a no-deal. That is why the Commission, after consultation with the member states, has prepared a list of US goods to be hit with retaliatory measures in the event of an open tariff war. This list affects goods worth €90 and is the result of the merger of the two previous lists: the first, worth €21 billion, was finalised in March, and the second, worth €72 billion, was finalised in recent weeks. In the end, therefore, for US President Donald Trump, there also comes a €3 billion “rebate”.
However, the special €90 billion countermeasure “bazooka” would not be triggered immediately, i.e. on 1 August, the date set by the US administration for the introduction of tariffs on European products. In the worst-case scenario, the European retaliatory measures would be triggered on 7 August. EU sources anticipate that in the event of a failure to reach an agreement in the Council, there would already be a broad consensus to find a qualified majority vote to implement the EU Anti-Coercion Instrument.
English version by the Translation Service of Withub
