US-EU trade deal is a ‘dark day’ for Europe, says French PM

The Guardian reports: “The French prime minister, François Bayrou, said the EU has capitulated to Donald Trump’s threats of ever-increasing tariffs, as he labelled the framework deal struck in Scotland on Sunday as a “dark day” for the EU.”.

Indeed, it’s a heavy hit for the European export industries that had for decades the pleasure to export to the US with a baseline tariff of 4.8%. Now, the tariffs, according to the US-EU deal have trippled to 15%. This means that goods imported to the US will be charged with tariffs of 15%. This will make the EU goods more expensive for US buyers, unless the European exporters or the intermediary traders will reduce their prices and absorb some part of the tariff hike.

The Guardian confirms that “zero rates will apply to EU exports in important sectors including aircraft parts, some chemicals, semiconductor equipment and some agricultural products such as cork used in wine bottles and flooring”. As well, the US will keep tariffs on pharmaceuticals at the new standard rate of 15% – a higher tariff was feared by European pharma producers and their governments. Wines and spirits are still discussed – maybe Trump’s America hopes for low consumer prices for French and Italian wines.

Switzerland, a non-EU country, is still in negotiations but it may be expected that Switzerland will eventually sign for similar conditions as the EU.

Decades of good profits in dealing with the US are history and, what Europe must keep in mind: US goods entering the EU are charged with very similar tariffs or taxes, such as import VAT (ca 20%)  and customs duties levied by each EU member state individually. The EU import duties on US goods are still higher the the new US tariff of 15%.

As well, Trump’s policies of introducing reciprocal tariffs are not new. They have been discussed since long in the US and recommended by the most famous economists as the sometimes huge tariff differences were declared as not-sustainable for the US economy, creating each year higher trade deficits. Already the Biden Administration introduced a 100% tariffs on Chinese electric cars. But Biden did abolish the Trump tariffs on EU steel, trying to help the ailing European steel industry at the expense of the US steel makers.

Every entrepreneur, exporter, trader would ask to abolish all tariffs and import barriers that usually are in place to protect the other country’s  home industries. The same it is about the EU protectionist policies on import. For US goods sent to EU not much has changed, but for EU goods sent to the US, it has changed now a lot with the new US-EU trade deal and EU goods may become less competitive on the US markets. Is this US protectionism, or just fair play?