Customs deal: Europe and the US have agreed on a 15% additional tariff

Overview

The US will impose an additional tariff of 15% on most imports of goods originating in the EU, including cars, semiconductors, and pharmaceutical products, starting August 1. The US administration had originally announced a 30% additional US tariff on goods originating in the EU, which would have been significantly higher than the current 10% additional US tariff on most goods originating in the EU. In order to reach this agreement with the US administration, the EU Commission has agreed to purchase US$750 billion worth of energy from the US over the next three years and to invest an additional US$600 billion in the US. Both sides agreed to reduce tariffs on goods such as aircraft and aircraft parts, semiconductor equipment, and some agricultural products worth around €70 billion to zero.

US additional tariff rate of 15% also applies to cars, semiconductors, and pharmaceutical products

In a personal meeting between EU Commission President Ursula von der Leyen and US President Donald Trump on July 27 in Scotland, an agreement was reached on an additional tariff rate of 15%, which will apply to most products originating in the EU when imported into the US in the future. In comparison, the Japanese government has also agreed on a country-specific additional tariff rate of 15%, while the British government has agreed on a country-specific additional tariff rate of 10% with the US administration. The additional tariff rate of 15% will also be levied in future on imports into the US of medicines and semiconductors originating in the EU, which were previously duty-free when imported into the US. In addition, the additional tariff rate of 15% will also apply to cars originating in the EU, which are currently subject to a tariff rate of 27.5% when imported into the US.  This was a key issue, especially for German car manufacturers. Imports of goods originating in the US into the EU will not be subject to higher tariffs than before. This means that the EU Commission will not introduce the countermeasures it had already considered in the form of additional import tariffs on certain goods originating in the US when imported into the EU.

Possible quota system for steel and aluminum and increased cooperation in the energy sector

According to the US administration, the additional tariffs on imports of steel and aluminum from the EU and other countries will remain at 50% for the time being. However, EU Commission President Ursula von der Leyen emphasized in a press conference that a quota system is to be introduced for steel and aluminum. Cooperation between the EU Commission and the US administration in the energy sector is also to be strengthened. The EU will replace Russian gas and oil with significant purchases of US LNG, oil, and nuclear fuels. The EU Commission also plans to make strategic purchases of US AI chips. The EU Commission has agreed to purchase US$750 billion worth of energy from the US over the next three years and to invest an additional US$600 billion in the US.

Mutual customs duty rate of 0% as the success of the EU Commission

The fact that both sides have agreed to reduce tariffs on goods worth around €70 billion to zero can be seen as a success for the EU Commission. This includes trade in aircraft and aircraft components, certain chemicals, generic drugs, semiconductor equipment, certain agricultural products, resources, and critical raw materials.  Not all details in this regard have been clarified yet, and there is uncertainty as to whether the zero tariffs will also apply to wine and spirits. The list of products for which a mutual tariff rate of 0% will apply to imports into both the US and the EU is therefore to be expanded.

Conclusion

The deal between the EU Commission and the US administration increases planning security for EU companies, but at the same time reduces their opportunities on the US market. The additional tariff rate of 15% on top of the existing standard import tariff rate in the US leads to a huge price increase for goods from the EU. It is now particularly important for Austrian companies to analyze the specific competitive situation for their respective companies in the US and how dependent they are on this market. In the past, who bore the customs costs was a negligible factor, but this has now changed. The EU Commission sees the deal with the US administration as a “framework agreement,” the further technical details of which are to be negotiated in the coming weeks. It can therefore be assumed that the coming weeks will bring even more clarity in connection with the deal.