Trump's latest clumsy deal has unintended consequences
There's no disagreement on the baseline tariff of 15 per cent on all EU exports to the US imposed by the deal, which the European Commission president, Ursula von der Leyen, said was 'the best we could get.' Before Trump regained office, the average tariff on EU exports was 2.5 per cent.
Exactly what the new rate will apply to, however, isn't clear.
Von der Leyen said it would apply to European cars, pharmaceuticals and semiconductors, while Donald Trump said pharmaceuticals were 'unrelated to this deal.' The US has separate investigations of pharmaceuticals and semiconductors underway that could lead to sectoral tariffs on imports of those products – and another bout of confrontation and negotiation.
The new baseline tariff was, Trump said, in exchange for the EU 'opening up their countries at zero tariff,' whereas the EU says the agreement for 'zero for zero' tariffs relates to certain strategic products and their parts, like chemicals, semiconductor equipment and some agricultural products, and is a framework agreement that could lead to a lowering of tariffs on other products in future.
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The deal, like the handful of others the Trump administration has struck in recent weeks, has been described as a 'roadmap' for a detailed agreement rather than a conventional trade deal. There are, therefore, many grey areas in the agreement that will need to be filled in.
The agreement, once there is a document to agree to, would also have to be ratified by the European Parliament and the 27 individual national parliaments of the EU's members before it could take effect. All Trump's bigger trade deals involve headlines rather than substantive detail.
Like the deal with Japan, it envisages the EU buying a lot of US energy – $US750 billion ($A1.14 billion) of energy over the next three years, as well as weaponry. Trump also said the EU would invest $US600 billion in the US.
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