EU-US agreement, some sectors "under the fog" - What will happen to vehicles, pharmaceuticals, metals and microchips?
Europe's trade deal with the US for 15% tariffs on a wide range of products creates manageable impacts for companies, but does not address specific uncertainties for EU business groups. Brussels' agreement with Donald Trump leaves many questions for specific sectors, especially the automotive industry, pharmaceuticals, mining and microchip companies. These four sectors are expected to be subject to different measures, with corresponding impacts, according to a new report by rating agency S&P Global Ratings.
As additional indirect but important risks, the agency identifies the deterioration of global trade conditions due to tariffs, general market uncertainty, potential disruptions in supply chains, geopolitical tensions and the weakening of the dollar. A stronger euro makes the export of European products less competitive for countries outside the eurozone and especially for the US, which together with China constitutes the largest market in the world. These five risks are expected to exert greater pressure on European corporate groups than the tariffs themselves.
The 15% tariffs on EU exports to the US, announced on 27 July, are significantly lower than the 30% that would have applied in the absence of a trade deal before 1 August. While this pact is a sign of a manageable transatlantic trade relationship if the European Union shows flexibility to US demands, it is not yet legally binding and there appear to be differing interpretations on some points. Therefore, the agency does not expect a legal draft to be ready soon.
“The 15% tariff is not a guaranteed limit for all EU sectors. There remains considerable uncertainty about the treatment of some industries. Legal ratification of the agreement requires its publication in the US Federal Register and approval by the bloc. This introduces uncertainty about when the 15% tariff will come into effect for certain sectors, such as the car industry, which currently still pays a 27.5% duty. Similarly, the 50% measure on steel, aluminium and copper exports to the US remains in place for the time being,” the report said.
The agreement is expected to help reduce uncertainty for EU businesses and mitigate some of the major risks associated with US policies. However, the current situation has dampened business confidence and revenue and profit forecasts in many EU sectors. In their second-quarter results announcements, several companies have revised their expectations for the current year downwards, the report further states.
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