The US and the European Union (EU) have reached a deal on tariffs, agreeing to a 15% tariff on most exports to the US, including vehicles and automotive parts.
Update
The European Union has halted retaliatory tariffs on the US while the two countries finalise a trade deal.
The deal, due to be finalised by 9 August, would place a 15% tariff on exports to the US, including vehicles and automotive parts. The EU had prepared to place retaliatory tariffs on €93bn worth of US exports by tomorrow (7 August), including on automotives, but has now put a pause on these while the deal is finalised. Currently, the agreement is not legally binding, and the EU and US can further negotiate to fully implement the deal.
The pause on retaliatory tariffs is expected to last six months, pending the outcome of ongoing trade talks.
In a fact sheet, the EU said it is “the first step in a process that will be further expanded over time to cover additional areas and continue to improve market access”.
The deal reduces the cost of shipping vehicles and parts
from the EU to the US from a rate of 27.5% (a base tariff of 25% plus 2.5% for
non-USMCA compliance) to 15%. While this will be a relief for the automotive industry
compared to the threatened higher rate, it is still much more than the average
1.5% tariff on exports to the US that was previously in place before the Trump
administration. It’s also not the hoped for zero-for-zero tariff deal that the
EU was attempting to reach.
The agreement also means that automotive exports from the EU
will still be taxed higher than those from the UK, which has a 10% tariff, but
the UK’s automotive goods have a cap of 100,000 vehicles annually, while the
deal for the bloc doesn’t yet contain this threshold.
In response to the deal, industry lobby group European
Automobile Manufacturers Association (ACEA), which represents 16 OEMs including
BMW, Daimler Truck, Ford of Europe and more, said many elements still need to
be clarified.
“The agreement takes an important step towards easing the intense
uncertainty surrounding transatlantic trade relations in recent months, and ACEA
welcomes this development in principle,” Sigrid de Vries, director general of ACEA
said. “Nevertheless, the US will retain higher tariffs on automobiles and
automotive parts, and this will continue to have a negative impact not just for
industry in the EU but also in the US.”
The industry lobby group added that is will examine the
details as they become available and assess the implications for Europe’s
vehicle manufacturing. In a statement, it added: “The EU and the US should
focus on reducing obstacles to vital transatlantic automotive trade, paving the
way for stronger economic ties and shared prosperity.”
