U.S. President Donald Trump’s administration and European Union officials on Thursday released a bare-bones account of their trade deal that imposes a 15% import tax on 70% of European goods exported to the U.S., but left key areas including wine and spirits and steel blank, indicating talks would continue on those and a range of other important goods.
The two sides said the document made public Thursday was only “a first step in a process that can be further expanded to cover additional areas.” They are dealing with the vast range of goods traded between the two economies in the largest bilateral trading relationship in the world, involving US$2 trillion in annual transatlantic business.
The 3 1/2-page text, representing a political commitment and not legally binding, contrasts with typical trade agreements, which can be hundreds of pages long and carry legal force.
Key provisions include the 15% tariff on most EU goods, a zero rate on U.S. cars and other industrial goods exported to the EU, and a range of exceptions for aircraft and aircraft parts, generic pharmaceuticals and pharmaceutical ingredients, with other sectors to be added for goods crucial to each other’s economies. Those goods would face lower tariffs than before Trump’s tariff onslaught.
One category not excluded from the higher tariff was wine and spirits, which had enjoyed zero tariffs on both ends since 1997. The EU’s chief trade negotiator, Maros Sefcovic, said EU officials had not won an exemption “yet” but hoped to in future talks and that “doors are not closed forever” on that issue.
Proposals to exempt a certain amount of EU steel imports, known as a tariff rate quota, remain unresolved pending further talks.
The 15% tariff is much higher than tariff levels on both sides before Trump launched his wave of tariffs, which averaged in the low single digits. Tariffs are paid on the U.S. end — either absorbed by U.S. businesses importing the goods, lowering profits, or passed on to American consumers in higher prices at the cash register.
European officials have defended the deal against dismay from businesses and member governments over the higher tariff and criticism that the EU gave away too much. Commission President Ursula von der Leyen described the deal as granting quick relief from the even higher U.S. tariff on EU cars of 27.5% and opening the way for further negotiations that could exclude more goods from the 15% tariffs. The deal provides that the lower tariff on cars would apply retroactively from Aug. 1 if the EU can introduce legislation to implement its part by then, which officials say they will do.
“Faced with a challenging situation, we have delivered for our member states and industry and restored clarity and coherence to transatlantic trade,” von der Leyen said. “This is not the end of the process.”
Sefcovic echoed that sentiment, saying, “The alternative was a trade war with sky-high tariffs … it builds confidence. It brings stability.”
The deal also includes nonbinding EU commitments to purchase US$750 billion in U.S. energy and for EU companies to invest US$600 billion in the U.S. In both cases, the money would come from private companies and is based on assessment by the European Commission on what companies were planning to spend.