TMTPOST -- A framework released by The European Union and United States on Thursday confirmed the Trump administration will impose a maximum 15% tariff on most of European goods, including on highly-anticipated pharmaceuticals and semiconductors, but alcohol levies are left for further talks.
Credit：European Commission
The EU and U.S. have agreed on a a Framework on an Agreement on Reciprocal, Fair, and Balanced Trade, and intend the Framework Agreement to be a first step in a process that can be further expanded over time to cover additional areas and continue to improve market access and increase their trade and investment relationship, according to a joint statement issued on Thursday.
Under the Framework Agreement, the U.S. commits to apply the higher of either the U.S. Most Favored Nation (MFN) tariff rate or a reciprocal tariff rate of 15% on goods originated from the EU. Effective as of September 1, the U.S. commits to apply only the MFN tariff to European products including cork and other unavailable natural resources, all aircraft and aircraft parts, generic pharmaceuticals and their ingredients and chemical precursors.
In exchange, the EU intends to procure U.S. liquefied natural gas (LNG), oil, and nuclear energy products with an expected offtake valued at $750 billion through 2028. The bloc also intends to purchase at least $40 billion worth of U.S. artificial intelligence (AI) chips for its computing centers. European companies are expected to invest an additional $600 billion across strategic sectors in the U.S. through 2028. In addition, the EU plans to substantially increase procurement of military and defence equipment from the United States
Through the Framework Agreement, the EU managed to stave off U.S. President Donald Trump’s threat of hefty duties on European pharmaceuticals and semiconductors.
Trump on August 5 warned the upcoming pharmaceutical tariffs would be gradually lifted and eventually to 250%, “because we want pharmaceuticals made in our country.” A day later, Trump said he will impose “a very large tariff” on semiconductors and the tariff rate would be around 100%. He last week ramped up the threat, implying that the semiconductor tariffs could be as high as 300%.
The Framework Agreement secures “the best possible terms for the EU companies and consumers”, said EU Commission President Ursula von der Leyen in her post on social media X. She outlined the key terms such as exclusive guarantee on tariff limit for pharmaceutical and semiconductors sectors, all-inclusive 15% tariff ceiling for the vast majority of products, including on cars and pharmaceuticals, and zero-for-zero tariffs on products like aircraft, cork and generic pharmaceuticals.
As to the auto tariffs, the Framework Agreement suggested the U.S. will levy conditional tariffs. That means the American tariffs on automobile and parts imported from the EU will be capped at 15% , down from the current 27.5% rate, if the EU first introduce legislation to reduce its industrial duties. The mere introduction of EU legislation to reduce the rate of industrial tariffs would be enough to kick-start this trade-off, CNBC cited a senior government official.
The EU intends to eliminate tariffs on all US industrial goods and to provide preferential market access for a wide range of US seafood and agricultural goods, including tree nuts, dairy products, fresh and processed fruits and vegetables, processed foods, planting seeds, soybean oil, and pork and bison meat, according to the Framework Agreement.
EU Trade Commissioner Maros Sefcovic on Thursday said the deal with the U.S. sets out that the 15% auto tariff would be retroactively applied from the first of the month in which the legislative process begins.
But the Framework Agreement didn’t address European capitals’ concerns over the wine and spirits industry. The EU was reported on August 5 that it continued to push for exemption from a baseline 15% tariff for its wine and spirit exports as part of trade deal with the U.S. cover. Sefcovic on Thursday acknowledged EU negotiators failed to secure U.S. exemptions from the alcohol tariffs , but added that he would continue to discuss it with American counterparts.
