This agreement offers a better tariff environment for European exports. A meeting in Edinburgh, Scotland this week sealed this deal. It leaves a dramatic blow to America’s trade tensions with the European Union. It is intended to be a tool to foster more inclusive and transparent markets, and it aims to mitigate the impact of tariffs on U.S. pharmaceuticals and semiconductors.
Last month, Trump threatened a blanket 30% tariff on all European exports, to go into effect in April. He singled out pharmaceuticals and semiconductors in particular for being excluded from the initial handshake trade agreement. This unilateral move sent shockwaves across the Atlantic, prompting concern from European leaders as well as industry advocates. The 2019 negotiations so far have produced a historic framework agreement. We have some fine-tuning to do in the upcoming weeks, but stay tuned.
Under the new terms, the US and EU have committed to limit tariffs on pharmaceuticals and semiconductors to no more than 15%. This brings those tariffs into line with the tariffs on nearly every other sector in the deal. Considered in concert with other recent efforts, this development represents a major victory for Trump’s America First Trade Agenda. Its prime mission is to win fairer deals for American workers at home and access abroad.
US Secretary of Commerce Howard Lutnick emphasized that this deal creates historic access to the vast European markets for American producers. He emphasized that the deal sets the stage for deeper and broader trade relations between the two economic powerhouses. The decision to include pharmaceuticals and semiconductors as part of the 15% tariff rate has been widely praised as a savvy move by industry leaders.
Second, higher tariffs on auto exports will remain at 27.5%. These tariffs will remain in place until the EU removes all tariffs on US industrial goods. The White House already announced the intent for the United States to reduce the tariff on imports of European motor vehicles to 15%. This cut will go into place immediately once Europe drops its tariffs on American exports.
On 1 September, the new, lowered tariff rates will go into effect. These rates would apply to nearly all European goods, including the export of semiconductors and lumber. Previously, Trump had seemed to suggest that pharmaceuticals tariffs could be as high as 250%. This agreement is an important development step in allaying concerns among stakeholders in those industries.
European Commission President Ursula von der Leyen sounded hopeful about the prospects for US-EU trade relations after her meeting with Trump. The two leaders exchanged seated handshakes and solemnly pledged to help each other’s economies cooperate more closely. Von der Leyen underlined that this deal is only the “first step in a process.” Like any strong collaborative bond, the further their relationship progresses, the more there is to build on.