The United States continues to exert significant economic pressure on the European Union, with a recent executive order reaffirming a 15% tariff on a broad range of EU products. This move, stemming from an agreement between US and EU leaders, notably maintains existing higher tariffs on the automotive sector, signaling sustained tension in transatlantic trade relations.
Despite ongoing negotiations, former President Donald Trump’s administration has shown little inclination to alleviate the financial burden on European, particularly German, car manufacturers. The executive order, issued on July 31st and effective just before August 1st, specifically omitted any reduction in tariffs for EU vehicle imports, contrary to expectations held by some trade observers.
Since April 2nd, European automobiles have been subjected to a hefty 25% tariff under Section 232 of the US Trade Expansion Act. This particular legislation grants the US President extensive authority to restrict the import of goods deemed a threat to national security, a controversial justification frequently invoked in recent trade disputes.
A significant trade understanding reached with Commission President Ursula von der Leyen last Sunday was widely anticipated to introduce a reduced 15% tariff rate for EU cars and provide exemptions for strategic products, such as aircraft. However, the comprehensive executive order published subsequently failed to incorporate either of these crucial provisos, creating further ambiguity and disappointment within European trade circles.
The executive order institutes a sweeping 15% tariff on all specified EU goods, set to take effect from August 8th. For products already in transit prior to this date, a previous 10% tariff rate will apply until October 5th. Furthermore, the order explicitly warns that any attempt to bypass these newly imposed tariffs will be met with a severe 40% duty on the circumvented goods, emphasizing the administration’s resolve.
Amidst the uncertainty, Maroš Šefčovič, a prominent European official, affirmed that “the work continues,” highlighting the ongoing nature of discussions surrounding the broader political trade agreement initially established on July 27th. This suggests a glimmer of hope for future adjustments, even as immediate pressure intensifies on the EU’s economy.
The fate of steel and aluminum imports remains particularly precarious, currently enduring punitive 50% US tariffs. The European Commission anticipates these high duties will soon be replaced by more favorable lower tariff-rate quotas, reflecting ongoing pressure from European industries. Concurrently, negotiations persist over various other product exemptions, driven by substantial lobbying efforts from sectors like the influential EU wine and spirits industry.
Adding another layer to the complex trade landscape, the Commission recently noted that a white paper on digital networks, published in February 2024, concluded that imposing a network fee was deemed “not a viable solution.” A Commission spokesperson underscored that “such an exemption would not apply to US company only,” indicating a broader policy stance beyond specific bilateral trade issues.
