On 21 August, the EU and the US published the long-awaited joint statement on the framework agreement on trade and tariffs, reached in Scotland on 27 July. The statement delivers clarity on the concrete terms of the deal, confirms a 15% all-inclusive tariff on EU exports to the US (with a number of exceptions), and a commitment from the EU to boost its purchases of US energy and AI chips. The statement also contains a new pledge by the EU to substantially increase procurement of US military and defence equipment, with the shared aim of increasing NATO interoperability.
The joint agreement remains a political agreement, meaning it is not binding, and several aspects will still need to be smoothed out at the technical level over the coming months.
What’s confirmed and what’s new
The text confirms that the new 15% all-inclusive tariff ceiling will cover most EU exports and will also apply to goods currently undergoing an internal US trade investigation (e.g. lumber, cars, pharmaceuticals and semiconductors) once it is over. The new rate is of particular importance for the EU car sector, which will see a significant drop in tariffs from its original 27.5%. Limited exceptions to the new rate are foreseen for certain strategic goods, such as aircraft and aircraft parts, generic pharmaceuticals, unavailable natural resources, and chemical precursors, which will continue to be subject only to lower Most Favoured Nation (MFN) tariffs as of 1 September. Spirits are currently not among the exempted goods, delivering a significant blow to some Member States, notably France. The two blocs have, however, agreed to consider enriching the list to exempt more goods in the future. The new text does not deliver lower tariff rates for steel and aluminium but rather confirms that the two parties “intend” to cooperate to combat overcapacity, including through new tariff rate quotas.
The EU has committed to eliminate tariffs on all US industrial goods and to grant US seafood and agricultural goods preferential market access. Brussels also confirmed its commitment to boost its purchases of US energy to $750 billion through 2028, although it is still unsure whether the Union will be able to sustain such an increase. Additionally, US suppliers might not be able to provide a sufficient volume of new energy products over three years. Besides energy, the text also reiterates that the previously announced $600 billion of EU investments in U.S. strategic sectors through 2028 are an estimate of expected investments by EU private companies and will not involve EU public finance. Finally, the EU intends to purchase at least $40 billion worth of US AI chips and also committed to substantially increase procurement of US-made military and defence equipment, a previously unconfirmed pledge.
The text further contains several promises to reduce or even eliminate non-tariff barriers for the automotive, agri-food, and energy supply sectors. The two blocs agreed to establish a shared platform to address concerns on the EU deforestation rules to avoid “unnecessary barriers to transatlantic trade”. Brussels further committed to make all the necessary efforts to ensure that the EU sustainability reporting and due diligence rules will not pose undue restrictions on trade with the US. Finally, the Union also pledged to provide new flexibilities in implementing its carbon tariffs for imports, the Carbon Border Adjustment Mechanism (CBAM). In a dedicated Q&A, the European Commission has, however, underlined that this will not entail preferential treatment for US companies, but rather the introduction of new flexibilities for all companies in line with the already ongoing EU simplification agenda.
The joint statement also reaffirms both parties’ commitment to address unjustified trade barriers. Both Washington D.C. and Brussels agreed not to impose customs duties on electronic transmissions and to continue supporting the multilateral moratorium on such duties at the World Trade Organisation. The EU also confirmed it will not adopt or maintain network usage fees. Notably, no commitment has been made regarding EU digital legislation, with both the Digital Markets Act (DMA) and Digital Services Act (DSA) left out of the agreement.
Reactions to the joint statement
Similarly to the initial agreement from July, the joint statement has been met with mixed reactions from certain trade associations across different sectors.
The European Automobile Manufacturers Association (ACEA) welcomed the deal as a “positive step” for reducing tariffs for cars from 27.5% to 15%. The Computer & Communications Industry Association (CCIA) also reacted positively to the statement and to the commitment to address digital trade barriers. However, EU and US alcoholic beverages producers alike strongly criticised the statement for excluding spirits among the exempted goods. Discus, the US distillers trade association, noted that the 15% tariff on EU spirits could result in a loss of more than $1 billion in retail sales and cost over 12.000 jobs. Hervé Dumesny, SpiritsEurope’s Director General, similarly stressed that the current tariff rate will slow down “growth, investment, and consumer choice on both sides of the Atlantic” and urged the EU and US to reinstate a zero-for-zero tariff agreement for spirits. Markus J. Beyrer, Director General at BusinessEurope, also calledfor an expansion of the list of exemptions.
At the institutional level, EU Trade Commissioner Maroš Šefčovič described the statement as a “first step” to strengthen economic ties between the two parties. Reportedly, EU ambassadors reacted positively to the deal, while some EU diplomats referred to the text as “awful” and a “total capitulation”. At the national level, Ireland’s Tánaiste (equivalent to the Deputy Prime Minister) Simon Harris also welcomed the dealas an “important shield” for Irish exporters of pharmaceuticals and aircraft.
Next steps and what this means for business
The US has been enforcing the new tariff rate since 7 August. On the EU side, the text must still undergo a legislative procedure involving Member States and the European Parliament. Several points remain to be clarified at the technical level through further negotiations; This gives the EU room to manoeuvre to secure more favourable conditions for its businesses, notably by extending the list of exemptions.
While the joint agreement provides more clarity after weeks of uncertainty, the uneven sectoral coverage of the new text will likely result in differentiated impacts across EU industries. European exporters will need to be prepared for possible disruptions to supply chains and be ready to assess potential pressure scenarios for prices and profit margins. To better understand the real impact of the agreement on each sector, the upcoming negotiations on the technical aspects of the deal will be key.