On Thursday, August 21, the United States and European Union announced a “Framework on an Agreement on Reciprocal, Fair, and Balanced Trade.”
After the European Union follows through on lowering tariffs on American goods, U.S. tariffs on cars and car parts will be lowered to 15%. This is half of the 30% tariff Trump had threated and almost half of the current tariff rate on Europe’s auto, which is 27.5%, CNBC reported.
The European Union intends to eliminate all tariffs on industrial goods imported from the U.S. and to widen preferential market access to U.S. seafood and agricultural products.
According to the deal, the United States commits to apply the higher of either the U.S. Most Favored Nation (MFN) tariff rate or a tariff rate of 15%, comprised of the Most Favored Nation tariff and a reciprocal tariff, on originating goods of the European Union. Additionally, effective as of Sept. 1, the United States commits to apply only the Most Favored Nation tariff to the following products of the European Union:
- Unavailable natural resources (including cork)
- All aircraft and aircraft parts
- Generic pharmaceuticals, their ingredients, and chemical precursors.
In exchange, most European Union exports — notably pharmaceuticals, semiconductors and lumber — will be taxed at 15%. The group of 27 member nations also agreed to ensure its companies invest $600 billion in the U.S. and to purchase at least $750 billion worth of U.S. energy over the next three years, according to the White House.
The announcement states that the United States and the European Union commit to work together to reduce or eliminate non-tariff barriers. With respect to automobiles, the United States and the European Union intend to accept and provide mutual recognition to each other’s standards. Cooperation on standards plays a crucial role in enhancing the transatlantic marketplace.
The nations said that they “intend this Framework Agreement to be a first step in a process that can be further expanded over time to cover additional areas and continue to improve market access and increase their trade and investment relationship.”
The White House fact sheet on the trade deal is available here.
Please contact Samantha Rocci, director of federal affairs, at srocci@rvia.org with questions.
