Will EU’s Vote on US Trade Deal End Tariff Conflicts—Or Just Delay Them?
EU-US Trade Deal: Implications and Industry Reactions
By Philip Blenkinsop
BRUSSELS, June 15 (Reuters) - The European Union is poised to implement the import duty cuts it agreed with U.S. President Donald Trump last year, averting at least for now another eruption of tariff conflict between the world's largest trading partners.
The European Parliament will vote on Tuesday on legislation to fulfil the EU's side of the trade deal struck nearly 11 months ago at Trump's Turnberry golf course in Scotland.
A clear majority is expected to back the agreement that includes the removal of EU duties on U.S. imports and broad U.S. tariffs of 15%.
Trump threatened "much higher" tariffs unless the EU acted soon.
European Industry Response
Industry Urges Lawmakers to Back the Deal
EUROPEAN INDUSTRY SAYS A DEAL IS NEEDED
Industry has urged the lawmakers to back the deal and European automakers, particularly hard hit by tariffs, are already making preparations on its basis. The Turnberry deal removes a 10% EU import duties on U.S. cars.
Volvo Cars, which produces the majority of its U.S.-bound vehicles in Europe, will start making some of its best-selling XC60 SUVs at its South Carolina factory later this year and start producing at a new hybrid there by the end of the decade.
Fifteen business associations representing EU carmakers, as well as textiles, cosmetics and food and drink producers, said backing the deal would ensure stability for businesses that rely on annual transatlantic trade of $2 trillion .
But in a statement they said it was "not the end of the conversation".
Next Steps and Ongoing Concerns
The crucial next step will be whether Washington's new tariffs due to come into force from July 24 will exactly reflect the Turnberry accord.
The two sides also need to agree to refrain from reimposing mutual tariffs on $11.5 billion of goods related to a decades-long dispute over aircraft subsidies. A five-year suspension of those tariffs is due to expire on July 11.
U.S. Trade Representative Jamieson Greer said the United States will stick to the deal, but Bernd Lange, chair of the EU assembly's trade committee, expressed doubts.
"The decision is in the White House by the president and therefore nobody knows what will really happen," he said.
Trump's warning of 100% tariffs on French wine on Monday could certainly unravel the Turnberry deal.
Lange says the European Union should, if necessary, be ready to suspend parts of the deal. It could also activate its Trump tariff countermeasures on €93 billion ($108 billion) of U.S. goods, which are suspended until August 6.
Beyond Tariffs: Differing Priorities and Regulatory Issues
Non-Tariff Barriers and Regulatory Disputes
NOT JUST TARIFFS, DIFFERING PRIORITIES
Beyond tariffs, Washington and Brussels must work on other elements of the Turnberry deal and each side has very different priorities.
The United States insists the EU address non-tariff barriers and regulatory matters, including U.S. concerns over the EU's carbon border tax and its requirements on companies to prove commodity imports are not from deforested land or audit their supply chains for human rights or environmental harm.
The EU has scaled back some of its regulation and extended deadlines to comply. But Exxon Mobil Corp wants the EU's corporate sustainability law scrapped and has taken its grievances to Trump.
EU Complaints and Metal Derivatives
The European Union's complaints include U.S. tariffs above 15% applied to products containing metal such as washing machines, wind turbines and motorcycles.
Trump even widened the range of products, known as metal derivatives, a month after the Turnberry deal.
Some have since been removed from the list, but EU legislation calls for the European Commission to suspend tariff reductions on U.S. steel or aluminium goods unless all the tariffs fall back to 15% by the end of the year.
EU cutlery and catering equipment makers say the higher tariffs risk pricing them out of the U.S. market or compressing already thin margins.
Steel, Spirits, and Future Trade Hopes
Steel and Aluminium Tariffs
STEEL DEAL, SPIRITS EXEMPTION HOPES
The European Union also wants the United States to replace 50% tariffs on steel and aluminium with tariff-free quotas and to increase the range of tariff-free products.
Wine and Spirits Industry Perspectives
EU wine and spirits makers are keen to be first in line.
They have allies among U.S. spirits producers, which favour no tariffs for both sides, pointing to a 450% growth of bilateral trade from 1997 to 2018 when a zero-for-zero tariff regime was in place.
That regime ended with tariff conflict in Trump's first term and Chris Swonger, president of the Distilled Spirits Council of the United States, said the risk of another hung over the industry.
Section 232 Investigations and Tariff Risks
Ongoing uncertainty over "Section 232" investigations that Trump can use to apply tariffs if products are judged to threaten U.S. national security is also a risk and could mean the Turnberry deal terms are broken.
One threat that has receded is of Trump suddenly introducing new tariffs, such as those he said he would impose on European allies over Greenland in January.
After the U.S. Supreme Court's decision to strike down Trump's global tariffs, his administration now needs to carry out a formal investigation before imposing levies.
Expert Commentary
"There might be other tools the United States finds to make threats for political reasons, but I don't think tariffs are going to be that instrument, because it is no longer available," said Ignacio Garcia Bercero, senior fellow at think tank Bruegel.
($1 = 0.8614 euros)
(Reporting by Philip Blenkinsop; additional reporting by Marie Mannes in Stockholm and Tassilo Hummel in Paris; editing by Barbara Lewis)
