EU: Will Aim for Car, Auto Parts Tariffs to Drop to 15% on Aug. 1

Sefcovic referred to a joint statement released early Aug. 21 with further details of a U.S.-EU tariff deal that was initially reached in July. The joint statement said that Section 232 tariffs on autos and auto parts would be decreased on the first day of the month that the EU introduces relevant legislation in its Parliament.

Sefcovic told reporters in Brussels Aug. 21 that he had spoken to Commerce Secretary Howard Lutnick on Aug. 20, and that Lutnick assured him if the bill could be introduced by Aug. 31, the 15% treatment of cars and auto parts -- currently taxed at 25% plus most favored nation rates -- would be retroactive to Aug. 1.

Starting Sept. 1, there will be no reciprocal tariff, only the MFN rate on EU exports, for "unavailable natural resources (including cork), all aircraft and aircraft parts, generic pharmaceuticals and their ingredients and chemical precursors," the joint statement says.

Sefcovic said he spoke with members of parliament leading the relevant committees, "and I was pleading to them already this morning that we should work constructively on these very important issues, and be swift ... to deliver the results we are committed to."

Bernd Lange, chair of the European Parliament's committee on International trade and standing rapporteur for EU-US trade relations, posted on social media on Aug. 21, "The #US and the #EU have finally agreed on a written statement regarding their trade agreement. Key issues -- such as exorbitant steel & aluminum tariffs, which were tightened once again a few days ago -- remain unresolved. Other issues are merely postponed in declarations of intent. The imbalance of the agreement, which clearly favors the US, is becoming increasingly apparent. This is no fair deal whatsoever."

The lack of a specific date when EU autos will face a total 15% tariff and EU auto parts will face the same rate is to push the EU process to move, a senior U.S. government official said. (Pickup trucks will continue to be taxed at 25%, since that is the MFN rate).

He said the linkage of the drop in auto tariffs to the introduction of a tariff bill is "to make sure that they get their mandate, that they feel sufficient pressure to obtain the mandate they need to begin the legislative process for reducing their tariffs. So as soon as they're able to introduce that legislation -- I don’t mean pass it and fully implement it -- really introduce it, then we will be in a position to provide that relief. And I will say that both sides are very interested in moving quickly, right? This is not a play by either side to slow it down. It's really you hold each other accountable. So we understand the EU is focused on the auto tariffs ... they intend to move quickly, and so do we,"

Sefcovic defended the deal as more favorable to the EU than any other partner. (Technically, the U.K. deal has lower tariffs, even on cars, and, because of USMCA carve-outs, more of Canadian and Mexican exports are duty-free.)

"We are fully behind it, and we are committed to deliver it," Sefcovic said, referring to market access promises for agricultural products and the elimination of industrial tariffs for U.S. exports.

"The alternative, a trade war with sky-high tariffs and political escalation, helps no one," he said.

The U.S. pledged that whatever actions it takes under Section 232 for lumber imports, semiconductor imports, and pharmaceutical imports, EU-origin products in those categories will face no more than 15% tariff rates. President Donald Trump has said he would impose a 100% or 200% tariff on imported medicines, though he also has said there would be at least a year before those tariffs bite, so that companies have time to open factories in the U.S.

Reporters asked Sefcovic about the fact that wine and spirits didn't return to MFN treatment under the deal, and instead, are at 15%, when, previously, spirit exports were duty-free.

Better treatment for beer, wines and spirits was one of the EU's top priorities, he said, adding, "unfortunately, here, we didn't succeed" to return to pre-reciprocal-tariff treatment.

He said he wanted to "add one very important word, and this is 'yet.' These doors are not closed forever. We've made very clear this is very important to us."

Sefcovic said U.S. negotiators have expressed different opinions about whether French, Spanish and Italian wine, German or Belgian beer, or Irish whiskey should be given a break.

He said ultimately they had to limit "the number of the so-called carve-outs" so it "would be acceptable for the president of the United States."

The statement says that the U.S. will consider removing the 15% tariff on "other sectors and products that are important for their economies and value chains."

Sefcovic said the other main export interest of the EU that is unsatisfactorily resolved is steel and aluminum, but he expects them to work together on tariff-rate quotas. EU steel exporters had TRQs during the Biden administration, though a significant minority of exports still paid 25% tariffs.

The statement says the U.S. will "consider the possibility to cooperate on ring-fencing their respective domestic markets [for steel and aluminum] from overcapacity, while ensuring secure supply chains between each other, including through tariff-rate quota solutions" for both the metals and derivative products.

The Office of the U.S. Trade Representative and the EU tried to work on an agreement on keeping steel made with non-market overcapacity out of their markets to return to pre-Section 232 steel trading terms for several years during the Biden administration, and did not succeed.

"This is not the end, it is the beginning," the EU's chief trade negotiator said.

The statement says the U.S. and the EU "will negotiate rules of origin that ensure that the benefits" of the agreement accrue predominantly to the U.S. and the EU.

Sidley trade attorney Ted Murphy wrote, "This suggests that, while the traditional substantial transformation test used under US customs law for determining origin may be used in the short run, we could eventually see new rules of origin that limit the benefits of this agreement to articles that contain a specified amount of US and/or EU content (for example), in addition to being last substantially transformed in the territory."

Sefcovic said, "concerning the rules of origin, of course, this will require more detailed discussions," but said having the same standard for establishing country of origin is a huge benefit.

The senior U.S. official who briefed reporters on background (see 2508200053) ahead of the release said: "So these are ambitious things, and we expect in the coming weeks -- hopefully weeks and not too many months -- to fully paper over the agreement."