EU and U.S. Finalize Trade Pact

The United States and the European Union have reached a significant agreement, aiming to strengthen economic ties between the two powerhouses. This deal, which does not mark the first step towards resolving trade disputes, unlike the NATO summit, is the second building block reaffirming the transatlantic partnership.

The agreement, valued at USD 1.7 trillion per year, accounts for nearly 44% of global GDP. This partnership promises to provide better access for American products to the European market, benefiting European consumers and making European businesses more competitive.

One of the key aspects of the agreement is the reduction of tariffs on various products. The United States and EU have agreed to reduce import tariffs from 30% to 15%. This reduction applies to key European exports such as automobiles, pharmaceuticals, electronics, and industrial machinery.

In addition, zero-for-zero tariffs have been agreed upon for certain strategic products, including all aircraft and component parts, certain chemicals, semiconductor equipment, certain agricultural products, natural resources, and critical raw materials. The EU executive intends to add more products to this list.

The agreement also includes a framework for further reduction of tariffs on more products. This is a significant step towards fostering a more open and competitive market.

Energy cooperation is another key component of the agreement. The partners have agreed to increase energy purchases, with the EU making significant purchases of US LNG, oil, and nuclear fuels to replace Russian gas and oil. This move is expected to diversify EU sources of supply and contribute to Europe's energy security.

The agreement also addresses non-tariff barriers and cooperates on economic security. The partners aim to address these barriers and work together to ensure a secure and stable economic environment.

The deal does not specify a timeline for the implementation of the energy cooperation and product tariff reductions. However, it provides certainty and stability for citizens and businesses on both sides of the Atlantic, as stated by Ursula von der Leyen, the Commission president, who approved the trade agreement with the United States. She has been in office since December 1, 2019, and was re-elected for a second term in July 2024.

The agreement includes a quota system for steel and aluminium, with both the US and EU facing global overcapacity. However, the specifics of this quota system are not mentioned in the agreement, unlike the one agreed upon earlier.

The tariffs on steel and aluminium are also to be reduced to reduce barriers between the trading partners. The EU has promised to implement a quota system for steel and aluminium, but the details of this system are yet to be disclosed.

The deal does not address the zero-for-zero tariffs agreement for certain strategic products, as mentioned earlier. This suggests that the partners may revisit this aspect in future negotiations.

In a historic move, US AI chips will power the EU's AI gigafactories, further solidifying the transatlantic partnership. This agreement is a testament to the shared commitment of the US and EU towards a stronger, more competitive, and more integrated global economy.