The Risk Of Rushing: Details Murky On Trump, Van Der Leyen Trade Deal

Forbes

a day ago

President of the European Commission Ursula von der Leyen shakes hands with President during a ... More meeting at Trump Turnberry golf club on Sunday in Scotland. (Photo by)
President Trump and European Union President Ursula von der Leyen shook hands on a deal Sunday to stave off 30% tariffs on U.S. imports from the E.U., which could have been effective on Friday, though it remains unclear what the deal is.
Perhaps what they really agreed to is to stall for more time. Historically, trade agreements take a great deal of time and review before being announced.
That said, it appears that most if not all U.S. imports from the European Union will face a 15% tariff. That's one area of disagreement if not among the two parties, then at least among the first reporting on the limited 'details.'
It also appears that most U.S. exports to the 27 nations of the European Union will not have a tariff. That's another area of disagreement, at least in the early reporting.
That 15% tariff on U.S. imports is up slightly from the 10% 'baseline' tariff already in place with all countries of the world since Trump began the global trade war to reduce the U.S. deficit, which is still increasing.
It is, of course, significantly higher than the 1.2% tariff rate on U.S. imports from the European Union that preceded it. (The 'deal' would seem to lower the 25% tariff in place on passenger vehicle imports into the United States.)
On the U.S. export side, the zero tariff rate would replace a rate of 2.8%, so not a big change. But a spokesperson for the European Union would not respond to a 'request for comment about Trump's claim."
Here's where it gets really important: Does the 15% tariff on E.U. imports include critical medicines and the compounds used to make those medicines, imports into the United States that Ireland and other European nations dominate?
President Trump says no, according to one news source. 'We have 15% for pharmaceuticals,' Von der Leyen said, according to another.
I wrote last week about the risk of the trade war on Americans' access to important medicines because of the United States' reliance on Europe for so many medicines and a great deal of the chemical compounds used to produce drugs here.
Regardless of whether pharmaceuticals are hit with 15% tariffs or not, it is not hard to imagine that whatever tariffs are ultimately imposed will put pressure on prices as the U.S. government collects revenues from the European Union and a host of other nations.
One thing on which Trump and van der Leyen did agree was that making a deal was important to both sides, given the strength of the trading relationship.
The United States' top 15 trade partners, which account for 44.40% of all U.S. trade, including 44.22% of all U.S. exports and 44.51% of all imports, includes the following seven European Union nations:
Overall, the trade with just these European Union nations is relatively balanced, with those seven accounting for 21.38% of all U.S. trade, including 20.27% of all exports and 22.05% of all U.S. imports. The overall deficit with these five nations is $149.61 billion.
The percentages for all 27 European nations is similar on total trade and U.S. exports but it drops on imports, since many of the other countries are without the same buying power. Overall, the European Union is accounting for 20.22% of all U.S. imports and 18.57% of all U.S. exports through May, the latest data available from the U.S. Census Bureau.
Gaining clarity on the issues will be important.
Six of the 10 U.S. imports from the European Union where the E.U. was a dominant source were in the area of pharmaceuticals and with chemical compounds used to make medicines in this country. The same six in 10 statistic is true of U.S. exports to the 27-nation European Union.
For example, 99.22% of $42.95 billion in U.S. imports in the insulin, hormone and steroid category (HS code 2937) through May were from the European Union, with 98.48% coming from Ireland, according to my analysis of the latest U.S. Census Bureau data. It is the top U.S. import from the European Union this year.
The same category is a top U.S. export to the European Union, accounting for 53.85% of the $4.94 billion in U.S. exports to the world, ranking fourth overall to the European Union.
But the 15% tariffs would affect a broad range of exports and imports.
The European Union is responsible for 79.77% of the $2.97 billion in wine imports into the United States through May and 80.78% of $2.15 billion in perfumes.
While these are the U.S. import categories that the European Union dominates by global market share, they are not the largest by value.
Among those not mentioned above for market share that are among the top 10 by value from the European Union are:
It is, of course, not clear whether those last two would face tariffs or not.
Switching over to the U.S. export side, the European Union has an appetite for the broad nut category (HS code 0802) that is dominated by shelled almonds and pistachios in the shell, with 37.49% of the $4.09 billion total in U.S. exports through May headed to the European Union. In addition, the E.U. has a thirst for the alcoholic spirits category (HS code 2208) that is dominated by bourbon and whiskey, with 46.66% of the total $1.08 billion sent to the world.
Any decrease in tariffs on these would certainly be welcome.
During the press conference announcing the framework for a deal, Trump emphasized that the European Union would be increasing its purchase of U.S. energy and, he hoped, cars.
The European Union, Trump said, would be buying $750 billion in U.S. energy products, though it was not clear over what period of time or even which ones, specifically. In 2024, U.S. exports to the world of oil, gasoline and other refined petroleum products, and natural gas such as LNG – the dominant categories – was less than $300 billion. And most refined petroleum exports stay in the Western Hemisphere.
But the European Union is a big market for U.S. exports of oil, petroleum gas and cars.
One thing is clear: There is more work to be done before it is clear what the deal on which Trump and van der Leyen shook hands actually is.