Donald Trump and Ursula von der Leyen close US-EU trade pact on cars and energy. Photo / Getty Images
Donald Trump and Ursula von der Leyen close US-EU trade pact on cars and energy. Photo / Getty Images
Europe is to be flooded with American cars and energy after Brussels struck an eleventh-hour trade deal with Donald Trump.
Under the terms of a pact announced on Sunday, the European Union will face 15% tariffs on exports to the US, staving off a full-blown trade war after months ofnegotiations.
Trump had threatened to impose tariffs of 30% on the bloc if no deal was reached by August 1.
In return, Trump said, the EU has offered zero tariffs for US goods going in the opposite direction.
Speaking at his Turnberry golf resort in Scotland on Sunday after meeting Ursula von der Leyen, the president of the European Commission, Trump said the deal is “the biggest of them all”, following earlier agreements with Britain and Japan.
As part of the pact, the EU has said it will import US$750b ($1.2t) of energy from the US and invest a further US$600b into the world’s largest economy.
“We are agreeing that the tariff straight across for automobiles and everything else will be a tariff of 15%,” said Trump, who has long called for Europe to purchase more oil and gas from America.
“We have the opening up of all the European countries, which were essentially closed. You were not exactly taking our autos, you weren’t exactly taking our agriculture. Now it is open.
“It is open for our companies to go in and do a good job.”
The EU will face 15% tariffs on exports to the US, avoiding a full-blown trade war. Photo / AFP
‘A lot of unity and friendship’
The US President said the deal will mean more European customers will be able to buy American pickup trucks and SUVs, and that trade between the two economies will flourish.
“They [Europe] are going to make a lot of money with this,” Trump said. “I think everybody is. And it is going to bring a lot of unity and friendship.”
Trump’s tariff blitz has rocked financial markets in recent months, with ever-changing policies wreaking havoc for traders and government officials.
The predominant aim of his trade war is to force more global manufacturers to set up factories in the US, increasing domestic tax revenues in the process.
Von der Leyen said the aim of the deal was to “rebalance” trade between the two blocs.
“The starting point was an imbalance, a surplus on our side and a deficit on the US side, and we wanted to rebalance that,” she said.
“We wanted to do it in a way that trade goes on between the two of us, across the Atlantic.
“The two biggest economies should have good trade flowing: rebalance, but enable trade on both sides, which means good jobs on both sides of the Atlantic, which means prosperity on both sides of the Atlantic. That was important to us.”
However, Trump said the deal does not cover imports of steel or aluminium, which incur a higher tax of 50% when sold into the US. Exports from Britain face a lower charge of 25%.
Bilateral goods trade deficits with Washington. Photo / Capital Economics
Drugs companies excluded from deal
Before the deal’s announcement, he also said the EU deal would not include pharmaceuticals, which are expected to be covered under separate tariff negotiations.
This will serve as a significant setback for Ireland, which counts on pharma as a key part of its economy.
“We have to have them made in the US,” said Trump. “We want them made in the US. Pharmaceuticals are very special.
“We can’t be in a position where we are relying on other countries. Europe is going to make pharmaceuticals, drugs and everything else for us too, a lot, but we are going to make our own.”
Claus Vistesen, of Pantheon Macroeconomics, said the 15% tariff was lower than had been feared and is unlikely to spook markets, but will still harm both the American and EU economies.
“Trump is finding a middle ground,” Vistesen said. “He is still shooting himself in the foot. US consumers will pay higher prices, and growth in trading partners will be lower than it would have otherwise been.”
