EU races to secure lower US tariffs on car industry

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The EU is racing to secure lower tariffs for its prized car industry this month after Washington refused to cut its 27.5 per cent rate on autos until Brussels introduces legislation to ease its duties on American goods.

After weeks of negotiations, the US and the EU on Thursday outlined the full details of the transatlantic trade deal they struck in Scotland last month, which set the tariff rate on most exports from the bloc at 15 per cent.

Maroš Šefčovič, European trade commissioner, said on Thursday he hoped to launch a legislative proposal to lower its tariffs on US some goods by the end of August.

“Tariffs on cars and car parts will drop to 15 per cent, starting August 1, helping our automotive industry remain globally competitive,” he said, adding that the US duty reductions would work retroactively.

The car industry is losing hundreds of millions of euros every month, since it relies heavily on exports to the US. Germany, the EU’s biggest economy, had pushed hard for the hasty deal agreed in principle in Scotland to staunch the vital auto industry’s losses.

A US official said on Wednesday evening that Washington would hold off on lowering the car tariffs to make sure the EU was “undertaking its part”.

US President Donald Trump imposed a 25 per cent tariff on European car exports in March, which came on top of an existing rate of 2.5 per cent.

The president has sought to reshape global trade in his second term with sweeping levies on dozens of trading partners.

The EU secured a much lower tariff than the 30 per cent previously threatened by Trump, but the duty still marked a threefold increase on its average rate before the US president re-entered office.

The continued wrangling over the EU deal shows that despite the public fanfare over trade agreements struck with the Trump administration, many details still remain mired in negotiations.

In exchange for a reduction to 15 per cent on cars, the EU agreed to eliminate tariffs on all US industrial products including cars and give preferential market access to many seafood and agricultural goods, including pork, dairy products and tree nuts.

This requires approval by the member states and the European parliament, which could take some time, so EU officials have pushed for the US to move as soon as legislation is introduced by the European Commission.

Thursday’s statement confirmed that the deal would cap US tariffs on pharmaceutical goods, lumber and chips at 15 per cent. The US has previously threatened higher tariffs on all three sectors, which are subject to national security probes.

The statement also said the US would apply a zero tariff rate to aircraft and aircraft parts, generic pharmaceuticals and their ingredients, and “unavailable natural resources” such as cork.

A push by France and Italy for a similar carve-out for wines and spirits failed but Šefčovič said Brussels would continue to press the case.

The two sides struck a deal last month to lower Trump’s reciprocal tariffs on the bloc’s goods to 15 per cent or the general “most favoured nation” level if higher.

While the rate on European cars would go down to 15 per cent, importers of pick-up trucks, which make up a large slice of the market, would continue to pay 25 per cent.

Brussels had pledged not to change its internal regulations on car standards as part of a deal, but the statement showed it had agreed to work towards “mutual recognition” of US standards.

Trump has long complained that the bloc’s standards had been used to keep out American vehicles.

The EU also confirmed it “intends to procure” $750bn of American liquefied natural gas, oil, and nuclear energy by 2028.

It also said it intends to purchase at least $40bn of AI chips and more weapons, confirming pledges made by European Commission president Ursula von der Leyen when she met Trump in Scotland.

But the final level of duties on the European steel and aluminium industry, which was hoping for immediate relief from 50 per cent tariffs, was still unclear.

The statement confirmed that the two sides would consider a lower tariff quota for the metals as part of an effort to “secure supply chains between each other” but added that further talks were required.

Additionally, the two sides agreed to work together on investment reviews and export controls, an attempt to curtail the growing economic influence of China.

A senior US official on Wednesday evening said Washington’s deal with the EU was “one of the most significant” of the recent trade agreements it had struck.

Šefčovič also hailed the deal and said it was a “first step” towards greater liberalisation of transatlantic trade.