EU and USA facing trade crisis: tariff increases and negotiations are heating up!

EU and USA facing trade crisis: tariff increases and negotiations are heating up!

Trade relations between the European Union (EU) and the United States face crucial negotiations that must be completed by July 9, 2024. The EU appears ready to accept a universal tariff of 10% on many exports. However, this comes on the condition that the US lowers its tariffs in major sectors such as pharmaceuticals, alcohol, semiconductors and commercial aircraft.

Against the backdrop of these negotiations, President Donald Trump is threatening to increase tariffs on EU exports to up to 50% if no agreement is reached. While the European Commission sees the proposed trade deal as slightly in favor of the US, it considers it acceptable for resolving the deadlocked trade dispute. EU Trade Representative Maros Sefcovic is leading a delegation to Washington to continue talks and find possible solutions.

EU demands and countermeasures

The EU is pushing for exemptions to reduce US tariffs, particularly the 25% tariffs on automobiles and auto parts and the high 50% tariffs on steel and aluminum, which affected a total of 24 billion euros worth of exports from the EU in 2024. This happened primarily with regard to the main export countries Germany, Italy and France. In addition, the EU has already prepared countermeasures in the event that a satisfactory agreement is not reached.

As part of these preparations, the EU has approved tariffs on 21 billion euros worth of US goods, while it has drawn up another list of tariffs on 95 billion euros worth of US products, including industrial goods such as Boeing planes and US cars. The aim of these measures is to increase the pressure on US negotiators.

Bilateral trade and economic impact

Bilateral trade in goods between the EU and the US amounted to an impressive 851 billion euros in 2023, of which the EU exported goods worth 503 billion euros and received back imports worth 347 billion euros. This leads to an EU trade surplus in goods of 157 billion euros. Bilateral trade in services reached 746 billion euros, with the EU exporting services worth 319 billion euros and importing 427 billion euros, resulting in a deficit in this sector.

The EU faces critical challenges due to US tariff policy. To counteract this, the EU Commission has published a question and answer catalog on US customs policy and is committed to an open, predictable and fair global trading system. The average tariff rate on trade between the EU and the US is around 1%, although the US has imposed tariffs of around 7 billion euros on EU exports, while the EU applied tariffs of around 3 billion euros on US exports.

The EU remains optimistic that a provisional agreement can be reached with the US by the July 9 deadline. The negotiations have the potential to reduce not only tariff but also non-tariff barriers to trade and provide fair access to key US markets, which would be of great economic importance for both the EU and the US.