Insight
In defence of a bad deal by Aslak Berg, 7 August 2025 The EU-US deal will hurt their economies, raise tariffs and weaken the global legal order. But despite it all, the EU was right to accept. A trade deal is normally the end stage of lengthy negotiations that produce a long list of documents detailing every concession made. In the case of last week’s EU-US trade agreement, there were no such details – only a political agreement with broad guidelines that leave many details unclear or to be negotiated. Moreover, many aspects of the deal are non-binding, or aspirational in nature. Although the agreement will leave everyone worse off in the end, the cost is manageable and preferable to a trade war the EU can ill afford and would likely lose. What did the EU get? Both sides have an interest in overstating what has been achieved, with the US side particularly prone to this. The wheat must therefore be separated from the chaff in decoding the agreement. On trade, the deal will have a real and immediate impact. Without an agreement, the EU was set to get a tariff level of 30 per cent plus the ordinary, or Most-Favoured Nation (MFN), tariff level in place before Trump. Although MFN tariff rates can go as high as 200 per cent, the average rate for the US is closer to 2 per cent. With the deal, EU products will get a flat 15 per cent except those products where the MFN rate is over 15 per cent, in which case the MFN rate will apply without any extra charge. The 15 per cent rate will also apply to three sectors that, without a trade agreement, would be affected by sector-specific tariffs: autos, pharmaceuticals and semiconductors. For products that have at least 20 per cent US content by value, the US content can be deducted from the value, benefitting products with integrated transatlantic supply chains. The most significant uncertainty is metals. The US has imposed 50 per cent tariffs on steel, aluminium and copper. For now, these stay in place, but there is a commitment to negotiate tariff rate quotas based on the historical level of imports. This would allow European products to benefit from lower tariffs until exports reach a certain fixed limit, after which they face the full 50 per cent tariff. What is not clear is the CER INSIGHT: IN DEFENCE OF A BAD DEAL 7 August 2025
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