Cars and drugs from the EU, US tariffs soon to reach 15%

Cars and pharmaceuticals exported by the EU to the United States will "very soon" be subject to an "all-encompassing" tariff of 15% , including the most-favored-nation (MFN) tariff. The US administration is currently investigating the two sectors that prompted the EU to sign the Turnberry Agreement, as US Commerce Secretary Howard Lutnick stated, to prevent production from migrating to the US. For both, a senior EU official explained, Brussels has received assurances that the tariff imposed upon Europe at the end of the investigations will not exceed 15%, including the MFN tariff.

Currently, European cars in the US are subject to a 25% tariff, plus 2.5% MFN, for a total of 27.5%. A reduction to 15% would provide immediate relief for the sector, which is strategic for the EU, and for Germany in particular. The situation is different for EU pharmaceuticals, which currently have zero tariffs in the US. Upon completion of the Article 232 investigation, however, the Trump administration could impose high tariffs on medicines imported from third countries. The European Union has been assured that, in its case, they will not exceed the "all-inclusive" 15% agreed upon by Ursula von der Leyen and Donald Trump on the president's golf courses overlooking the Firth of Clyde in the Irish Sea.

With a few exceptions, European steel and aluminum are currently subject to a 50% tariff from the US. The Commission will begin negotiations to obtain import quotas with a 15% tariff, while excess quantities will be subject to a 50% tariff. US industries require certain specialty steels that are not produced in the US and are imported from the EU, but concluding the negotiations will still take "some time," the source explained, given that the quotas are not easy to agree on.

In all this, for now, the US and EU have only a verbal political agreement reached by Ursula von der Leyen and Donald Trump at Turnberry, a verbal agreement that is not, nor could it be, legally binding. The political declaration that was supposed to be published last Friday will not be legally binding either, being a declaration and not a treaty. However, it will define the scope of the trade negotiations between the EU and the US, which will continue.

The source explained that work on drafting the declaration is "very advanced. 95% of it is ready," but the timing of finalizing the text depends essentially on the US counterparts, who are currently engaged in negotiations with many other trading partners. The declaration "will provide a little more clarity on the next steps" and on the areas on which "we will work further." The Commission is working to include in the text an initial list of products that should benefit from a preferential "zero for zero" or "zero for MFN" tariff regime, which will include several European and US products.

Among the American tariffs will also include agri-food products, such as bison meat , which does not compete with European farmers, who do not raise bison. European wines , spirits, and beers should not be included in this list, at least initially, and should therefore remain subject to a 15% tariff, even though the Commission is working to expand the list of exempt products, and the alcohol sector is a "high priority" for the EU. Meanwhile, today in the committee, as widely anticipated and as agreed with the US, EU countermeasures to US tariffs have been suspended for six months (member countries will give their approval by simple majority within two weeks).

In Brussels, the EU source clarified, no one is "celebrating" the agreement reached with the US on 15% tariffs. But to evaluate it correctly, we must also be "realistic" and understand that Donald Trump, even though the EU would like "zero-for-zero" tariffs, has no intention of taking that path. As Commissioner Maros Sefcovic said, the pre-Trump world will never return. Therefore, the result achieved by EU negotiators is not to be despised: unlike all other countries, the EU obtained an "all-inclusive" tariff of 15%, which includes the MFN tariff, rather than adding to it. While this may seem like a minor detail, it is not, as it has important practical consequences: on imported cheese, the senior official explained, the US typically applies a 14.9% MFN tariff. Now, for the EU, this means that the duty on cheese exported to the US will be 15% , an increase of 0.1 percentage points compared to the MFN tariff. For other countries, however, that 14.9% is added to the new duty: so, for example, English cheeses will pay 10% plus 14.9%, or 24.9%.

Consequently, even if EU cheeses (such as Pecorino Romano ) will in some cases be more expensive for American consumers, they will still enjoy a comparatively better position than cheeses from other countries exported to the US. This is the case for Switzerland, which starting tomorrow, in the absence of an agreement, will be subject to a 39% tariff, which will likely make Emmental prohibitively expensive in the US. It is foreseeable that higher-quality products will have less difficulty absorbing the additional tariff than those made for the mass market, which are more easily attacked by American competitors (which are often Italian in origin, in the case of cheeses).

EU negotiators will leverage the quality of European wines, pointing out to their American counterparts that in many cases, these are "unique products" that the US doesn't have, just like coffee, which the Americans don't impose tariffs on because they don't produce it. No matter how hard Napa Valley winemakers try, they'll never be able to replicate French Champagne or Italian Amarone and Primitivo. Beyond PGIs, a term that in the US is synonymous with unjustified protectionism, Europeans believe they have a good chance of convincing their US counterparts of the advisability of imposing MFN tariffs (zero is not possible, because Trump would have to pass through Congress) on European wines, beers, and spirits.

Generally speaking, in Brussels, the agreement reached with the United States is considered the "lesser evil," given that a trade war with the US would have led to an escalation of tariffs and counter-tariffs, which would have harmed European producers and consumers. It is certainly not a "perfect" agreement, but it is still "the best available treatment" among those decided by the Trump administration. Moreover, the vast majority of member states, led by Germany, favored appeasement, while only a "small minority" advocated a more forceful stance vis-à-vis Trump . On this point, the Commission responded forcefully to German Finance Minister Lars Klingbeil, who complained from Washington that the Commission had been too weak in negotiations with the US and that the EU should be "stronger."

These words caused great "surprise" in Brussels, said spokesman Olof Gill, given that EU member states, including Germany, have been kept constantly informed by the Commission about ongoing negotiations with Washington. Furthermore, though Gill did not say this, von der Leyen is German and a member of the EPP, and was nominated by the heads of state and government for the first time, against the wishes of the European Parliament, which would have preferred one of the Spitzenkandidaten (Manfred Weber, Frans Timmermans, or Margrethe Vestager). It is highly unlikely, if not improbable, that she went to Turnberry to finalize the agreement between Trump's golf games without the green light from the capitals, particularly Berlin. This is especially true given that Chancellor Friedrich Merz is from the CDU, the same party as Angela Merkel's former protégé.

Digital chapter. The senior official confirmed that the agreement contains nothing regarding the Digital Services Act and the Digital Markets Act, nor the digital tax measures that some member states have implemented individually. Instead, it contains two "very basic" commitments, one on internet usage fees and one on a moratorium on e-commerce tariffs. The latter is "standard language, included in almost every free trade agreement (FTA) signed in recent years."

In the joint statement, which is expected to be published "soon," the EU is also expected to make commitments regarding certain regulations, such as those on CBAM, the European "carbon tariff," or on deforestation. However, the source explained, the EU does not envisage preferential treatment for the US: it will be a regulatory simplification effort, which has already begun with the Omnibus measures, which seek to address the overregulation that occurred in some cases during the previous legislative session. This effort will apply to all EU partners, not just the United States.

However, as Trade Commissioner Maros Sefcovic has already clearly explained, the reason the EU has decided to sign a "lesser evil" or "second best" agreement, rather than fighting Trump and trying to force him to reconsider, as China has done, is that for Europe, there is much more on the table than transatlantic trade: it is the fate of Ukraine and, ultimately, European security.

Furthermore, as Franco Bernabé noted, China had the rare earths weapon , without which American industry would face serious problems, while Europe does not have such compelling arguments. For the EU , which still depends on Washington for its security, it was vital to keep the United States engaged . And so, after the Turnberry agreement and the future joint declaration, negotiations will continue to reach a proper trade agreement. To quote a Slovakian socialist, with the US on tariffs, "work continues in a constructive spirit."