Aerospace, Some Chemicals, Generic Drugs, EU Ag Products to Stay Duty-Free in US-EU Trade Deal

Many of those goods are currently duty-free, while the Commerce Department works on Section 232 investigations on aerospace, pharmaceuticals, semiconductors and critical minerals.

The EU president said the 15% tariff rate on cars, semiconductors and pharmaceuticals and goods currently subject to 10% reciprocal tariffs "is a clear ceiling. No stacking. All-inclusive."

Neither the White House nor the Office of the U.S. Trade Representative explained how that would work. The EU also didn't answer questions on how it would be implemented. In the Japan deal, a 15% rate for automobiles is reached by adding 12.5% to the 2.5% most favored nation rate (see 2507230012). The administration didn't explain what this means for products whose MFN rate is higher than 15%, such as worsted wool suits, wool overcoats or pickup trucks.

Maros Sefcovic, chief EU trade negotiator, told reporters in Brussels July 28 that the 15% will continue to apply after the Section 232 investigations conclude, and there will be no stacking of tariffs. "I believe this commitment will be honored," he said.

The Section 232 tariffs that won't be affected by the agreement are steel, aluminum and copper, the U.S. said in a fact sheet. "The sectoral tariffs on steel, aluminum, and copper will remain unchanged -- the EU will continue to pay 50% and the parties will discuss securing supply chains for these products," the sheet said.

The EU politicians suggest that language will result in tariff rate quotas after more negotiations. They also said there will be more negotiations about whether the U.S. will return to duty-free trade in wine and spirits.

In a prepared speech, Sefcovic said, "The agreement sees clear prospects of joint action on steel, aluminium, copper and their derivatives in what I like to call 'a metals alliance' -- effectively creating a joint ringfence around our respective economies through tariff rate quotas at historic levels with preferential treatment."

During the Biden administration, EU (and U.K.) steel was granted TRQs by country and by product.

The White House wrote that "The United States and the European Union will establish strong rules of origin to ensure that the benefits of this agreement flow directly to the United States and the European Union, not to third countries."

This is further evidence that the new tariff rates for all countries will require reporting of local content, not just that the goods originate in the exporting country (see 2507240077).

The White House also said the EU would allow all industrial goods from the U.S. into the EU without duty. USTR Jamieson Greer, in an interview on CNBC July 28, named medical devices and chemicals as areas that will see reduced tariffs, as well as "a number of agricultural goods."

Some European business interests and politicians criticized the deal as too favorable to the U.S., though BusinessEurope welcomed the deal with caveats, writing, "We still need to examine the details and hope that a solution is soon found for important sectors that appear to be excluded from the deal."

EU Parliament trade committee head Bernd Lange, wrote, "The defenders of yesterday’s EU-US deal will say that the worst has been averted, that the deal creates stability for the largest trading relationship in the world, that the deal ensures EU competitiveness vis-a-vis other partners and that provides cooperation between the EU and the US beyond trade. I strongly hope they are right. For my part, I see an asymmetry set in stone. What is the price we are paying for this deal?"

He continued, saying that "if this deal turns into binding commitments, the European Parliament and Council will have the last say on it.”

Sefcovic was asked about criticisms of the deal. He noted in his speech that businesses unanimously told EU politicians to avoid escalation.

To the reporter, he said that the recently announced deals between the U.S. and Vietnam, Japan and Indonesia, along with the number of tariff letters with rates as high or higher than the April 2 level, should make it "quite obvious the world which was there before the second of April is gone."

He said this deal was a "better outcome than an all-out trade war," which would have resulted in "tariffs of more than 30%, huge political tension and loss, potentially, of hundreds of thousands or millions of jobs. And what would happen after that? We would have to sit and negotiate a new deal, but in much, much worse conditions. This is clearly the best deal we could get under very difficult circumstances."

He also said that during negotiations geopolitics was discussed along with trade deficits, tariffs and non-tariff barriers. "It's not only about the trade, it's about security, it's about Ukraine," he said, and those aspects have worth, too.