How Trump's New Global Tariff Could Impact EU Trade Agreements
European Officials Seek Clarity on US Tariff Changes
Frankfurt (Germany): European leaders expressed their frustration on Monday, demanding clarity regarding the implications of President Donald Trump's announcement of a 15% global tax on imports. This declaration has led EU lawmakers to pause the ratification of a trade agreement made with Trump earlier this summer until further details are provided.
The trade committee of the European Parliament has delayed its vote on the ratification following Trump's announcement of the new tariff, which comes after the US Supreme Court invalidated his previous use of emergency powers to impose new import taxes. Trump has now turned to a different section of trade law to enforce the 15% global rate, set to take effect on Tuesday.
The EU's stance is clear: "A deal is a deal," stated commission spokesperson Olof Gill. "We are now asking the US to explicitly outline how they plan to uphold the agreement we reached."
The US-EU agreement was designed to cap tariffs on most European imports at 15%, while eliminating tariffs on US industrial goods. Although this deal increased the average tariff from 4.8% to 15%, it provided businesses with the certainty needed for planning, which helped Europe avert a recession last year.
However, the newly announced 15% tariff, which would be added to existing tariffs, violates the agreed-upon cap, according to Bernd Lange, chair of the parliament's trade committee. Consequently, legislators have postponed the committee vote that was scheduled for Tuesday.
Concerns also arise regarding other trade agreements with individual nations such as Brazil, India, and the UK. For example, the UK had negotiated a maximum tariff of 10% with the US, while India agreed to 18% and Vietnam to 20%. Although the Supreme Court's ruling does not directly impact these bilateral agreements, they were initially negotiated under the threat of imposing the now-invalidated tariffs. Revisiting these deals could be problematic, as Trump has indicated he will pursue tariffs through alternative legal avenues.
US Trade Representative Jamison Greer stated on CBS's "Face the Nation" that the administration had communicated to negotiating partners that Trump was committed to imposing tariffs regardless of the Supreme Court's decision, asserting that "whether we won or lost, there were going to be tariffs."
Greer emphasized that the bilateral agreements are beneficial and that the US expects to uphold them, as well as for its partners to do the same.
Transitioning from country-specific tariffs to a uniform 15% global tariff will have significant repercussions, noted Atakan Bakiskan, a US economist at Berenberg Bank. This new tariff structure results in a lower rate for certain countries, such as Brazil, which will see a nearly 15 percentage point reduction, and China, which will experience a reduction of almost 10 percentage points.
According to the law Trump is utilizing, these tariffs will only remain in effect for 150 days unless Congress votes to extend them. This timeframe may allow Trump to explore other legal options to support his tariff actions.
As uncertainty looms over European businesses, it also exerts pressure on the US economy, where consumers and companies bear the costs of tariffs on imported goods. Bakiskan remarked, "Uncertainty surrounding trade policy seems to be a persistent issue, continuing to exert pressure on the US economy."