Introduction
Yesterday Commissioner Maroš Šefčovič at the Foreign Affairs Council (Trade) held a press conference following the recent developments following Trump’s “Liberation Day” Tariffs Announcement (see our blog post on that topic here). Commissioner Šefčovič addressed the current trade landscape between the European Union (EU) and the United States (US), highlighting both the challenges and opportunities for strategic collaboration.
The Impact of Tariffs on EU Exports
Approximately €380 billion worth of EU exports to the US, which accounts for about 70 percent of the EU’s total exports, are now subject to tariffs ranging from 20 to 25 percent. When combined with existing Most Favoured Nation tariffs, such as the 27.5 percent duty on passenger cars, the financial burden becomes substantial. These tariffs amount to over €80 billion in duties, a significant increase from the €7 billion the US currently collects.
Key points for the future of EU-US trade
- Recognizing the need for a fresh look: Both the EU and the US acknowledge that their trade relationship could benefit from renewed focus and strategic enhancements. Common challenges include global overcapacities driven by non-market practices, the race for leadership in semiconductors, and the need to secure critical minerals. By collaborating, both sides can build a transatlantic marketplace that offers mutual benefits.
- The effort required for engagement: Engaging the US in meaningful trade discussions will require time and effort. The US views tariffs as corrective measures rather than tactical steps. The EU is prepared to negotiate whenever the US is ready, but patience and persistence will be necessary:
- In a bid to avoid a tit-for-tat trade war, European Commission President Ursula von der Leyen has proposed a “zero-for-zero” tariff scheme for industrial goods, including cars, chemicals, pharmaceuticals, rubber, and plastic machinery. This offer aims to remove all industrial tariffs between the EU and the US, fostering a more cooperative trade environment. Von der Leyen emphasized that the EU is always ready for a good deal and remains open to negotiations.
- The EU’s three-track approach: While the EU prefers negotiation, it will not wait indefinitely. The EU will pursue a three-track approach until tangible progress is made:
- Defending interests through countermeasures: In response to steel and aluminum tariffs, the EU has received feedback from Member States and stakeholders. A robust list of countermeasures has been tabled, balancing the burden across Member States. Duties on products will be implemented in phases (see our blog post on that topic here):
- The 2018 and 2020 lists will be re-implemented on 15 April.
- The tariffs for the new list of products will not be implemented until 15 May.
- Diversifying trade through new agreements: The EU aims to strengthen trade and investment ties with global partners, including India, Indonesia, Thailand, the Philippines, and the Gulf region. Efforts will be made to accelerate free trade agreement discussions.
- Deterring harmful trade diversions: The EU is prepared to use all available trade defense tools to protect the Single Market, EU producers, and consumers. This includes enhancing import surveillance and setting up a task force for timely intelligence.
- Defending interests through countermeasures: In response to steel and aluminum tariffs, the EU has received feedback from Member States and stakeholders. A robust list of countermeasures has been tabled, balancing the burden across Member States. Duties on products will be implemented in phases (see our blog post on that topic here):
Protecting the global trade system
The US accounts for 13 percent of global goods trade. The priority for the EU and the World Trade Organization (WTO) is to protect the remaining 87 percent and ensure the global trade system remains robust.
Engaging with China
The EU is also working to rebalance its trade and investment relationship with China. Recent discussions in Beijing addressed issues such as overcapacity, subsidies, market access barriers, and the need to level the playing field for EU companies. The focus was also on Chinese investments in the EU electric vehicle supply chain to boost competitiveness and jobs.
Baker McKenzie closely monitors the developments and issues regular alerts accordingly – please also check our Import and Trade Remedies Blog and Looking Ahead: Business Impacts of the Trump Administration for regular updates and insight.
