EU Finalises Agreement to Avoid US Tariff Hike and Boost Transatlantic Trade
Provisional EU-US Trade Agreement Details and Implications
By Philip Blenkinsop
Background and Key Provisions of the Agreement
BRUSSELS, May 20 (Reuters) - The European Union struck a provisional agreement on Wednesday on legislation to remove import duties on U.S. goods, a key part of the trade deal reached with Washington in July and a move likely to avert higher U.S. tariffs on EU products.
Under the terms of the deal struck at U.S. President Donald Trump's Turnberry golf resort in Scotland last July, the EU agreed to remove import duties on U.S. industrial goods and grant preferential access to U.S. farm and sea produce, while the U.S. imposes tariffs of 15% on most EU goods.
Legislative Process and Safeguards
Nearly 10 months since that framework accord, the European Parliament and the Council, the body representing EU governments, agreed on a legislative text to allow the EU duty reductions to come into force. After five hours of negotiations, they also agreed reinforced provisions to suspend the concessions in case Trump reneges on the agreement and a sunset clause to terminate the deal at the end of 2029 unless there is new legislation to renew it.
Impact on Transatlantic Trade Relations
The internal EU deal should bring some calm to the world's largest trading relationship, with an annual exchange of $2 trillion in goods and services, coming a week after Trump's visit to China that had warm words but no major breakthroughs. The EU has relied on the U.S. to take in some 20% of its goods exports, but Trump is determined through tariffs to reduce the goods trade deficit with the bloc of more than $200 billion.
Statements from Key Negotiators
"I am proud to announce that Europe has avoided a damaging escalation of transatlantic trade tensions and protected European companies, investments and millions of jobs on both sides of the Atlantic," Zeljana Zovko, the lead trade negotiator in the European People’s Party on the U.S. deal, said in an X post.
"The EU walks the talk, while defending our interests. Once approved, it'll boost transatlantic stability and cooperation," European Trade Commissioner Maros Sefcovic wrote on X.
US Tariff Threats and EU Legislative Response
Trump's July 4 Deadline and Tariff Threats
TRUMP SET JULY 4 DEADLINE
Trump has said he would impose much higher tariffs on EU goods including cars if the EU did not implement its trade deal commitments by July 4, having earlier threatened to raise tariffs on EU car imports to 25% from the current 15%.
EU Lawmakers' Concerns and Negotiations
EU lawmakers had twice paused the required legislation after Trump's threats to impose new tariffs on European allies who did not back his proposed acquisition of Greenland and after the U.S. Supreme Court struck down his global tariffs.
The bloc should now meet Trump's July 4 deadline, with a final vote of approval in the European Parliament expected in mid-June.
Debate Over Guarantees and Clauses
EU lawmakers had wanted tougher guarantees, but the two sides did not accept their proposed "sunrise clause" under which the EU would only cut duties when the U.S. fulfilled its side of the deal and the "sunset clause" was pushed from the end of March 2028 to the end of 2029.
The European Commission can also suspend tariff preferences by the end of this year if the U.S. keeps in place tariffs higher than 15% on steel and aluminium "derivative" products like wind turbines and refrigerators.
EU governments had had less appetite for inserting such items, concerned they could antagonise the Trump administration and create uncertainty for EU businesses.
Reporting Credits
(Reporting by Philip Blenkinsop, Chandni Shah in Bengaluru, Mrinmay Dey and Chris Thomas in Mexico City; Editing by Thomas Derpinghaus)