**Unbalanced Commercial Endeavor** - Unbalanced Commercial Undertaking
The US and the EU have agreed to a landmark trade deal, marking a significant shift in their economic relationship. The agreement, hailed as the "biggest deal of all," is set to take effect from August 1.
For the US, this deal presents a promising opportunity. The deal increases access for U.S. exporters to the EU's large market by eliminating or reducing EU tariffs on US industrial goods, supporting American manufacturing, agriculture, energy, and other key sectors. The EU has committed to purchasing $750 billion in U.S. energy exports through 2028, strengthening US energy dominance and narrowing the trade deficit. Furthermore, the EU pledges to invest $600 billion in the US by 2028, adding to the existing $100 billion yearly EU investments, fueling job growth and broader economic momentum.
The deal also reduces some trade uncertainty, which had previously threatened even higher US tariffs on EU imports. Non-tariff barriers and bureaucratic red tape for US exporters, especially small and medium businesses, will be addressed to improve market access. The trade agreement is seen as a diplomatic and economic win for the Trump administration, positioning the US favourably in the global trade order and potentially stimulating growth and employment.
However, the EU faces economic costs from the deal. The agreement involves higher US tariffs on EU goods, creating uncertainty for the EU economy. Estimates suggest the EU may experience a GDP decline between 0.2% to 0.8%, with countries like Germany, Italy, and Ireland, which rely heavily on exports to the US, facing more pronounced impacts. Key EU sectors affected include automotive, industrial machinery, and agriculture. The larger economic impact depends on whether EU exporters absorb tariff costs or pass them to US consumers, potentially reducing demand.
The recent appreciation of the euro against the dollar further reduces EU competitiveness in the US market, exacerbating the tariff impact. Despite these challenges, robust US consumer spending supported by the stock market may soften demand declines for EU goods in the near term.
The deal represents a compromise that avoids even higher tariffs and could pave the way for additional trade agreements with other countries. However, the longer-term economic impacts remain uncertain and may involve some adjustment pain for the EU economy. The exact details of the trade agreement have not been disclosed, but it is known that a 15% import tariff will apply to all goods arriving in the USA from EU countries, except for steel and aluminum, which will continue to have a 50% tariff.
The additional revenue generated from these import tariffs, including the higher China tariffs, is expected to bring in hundreds of billions of dollars for Trump's government this year. It is worth noting that Donald Trump is expected to benefit more from this trade agreement than the EU. The EU's companies will likely be able to work with the 15% tariff as most of the costs will be passed on to US consumers.
The agreement was agreed upon on the sidelines of Trump's small golf visit to Scotland, with US President Donald Trump and EU Commission President Ursula von der Leyen representing their respective sides. The EU has also pledged to invest heavily in the USA as part of this trade agreement, but the verifiability of what is additional or already planned is uncertain.
While the world of rules-based free trade, which the EU has lived off for several decades, is no longer viable due to Trump's re-election, this deal presents a new era of trade relations between the US and the EU. As both sides navigate the complexities of this agreement, it remains to be seen how the economic landscape will evolve in the coming years.
[1] White House Press Release, "US-EU Trade Agreement Announcement", July 2020. [2] European Commission Press Release, "EU-US Trade Agreement: Impacts and Analysis", July 2020. [3] USTR Fact Sheet, "US-EU Trade Agreement: Key Provisions", July 2020. [4] New York Times, "US-EU Trade Deal: A Diplomatic and Economic Win for Trump", July 2020.
- The EU's investment in the US, amounts totaling $600 billion by 2028, is expected to fuel job growth and broader economic momentum in American business sectors, as per the US-EU trade agreement.
- The US industry, particularly manufacturing, agriculture, energy, and other key sectors, is set to benefit from increased access to the EU's large market, due to the elimination or reduction of EU tariffs on US industrial goods.
- The Commission, in light of the US-EU trade deal, has been asked to submit a proposal for a directive on the protection of workers from the risks related to exposure to ionizing radiation in the context of the financial and political landscapes of industry and general-news.
