The EU-US Joint Statement on Trade: The End of the Beginning

Hi! Today is September 3rd, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.

Nathan Munch is a policy manager at the OECD. He previously worked at Business Europe in Brussels as an advisor to the President and Director General.

On August 21, the European Commission and the US government published a joint statement in nineteen points for “fair, balanced, and mutually beneficial trade and investment.”

What’s in the deal

This joint statement formalizes the informal agreement between Commission President Ursula von der Leyen and US President Donald Trump on July 27 in Turnberry, Scotland. US tariffs came into effect on August 7.

By securing an overall tariff rate of 15% (rather than 30%), the Commission congratulated itself on having avoided a trade war with the US.

However, this rate is more than triple the average tariffs applicable before Donald Trump arrived at the White House (4.8%).

Trade in goods between the EU and the United States is worth €867 billion in 2024 (and €817 billion for services).

Certain sectors are exempt, such as aeronautics (aircraft and spare parts), which will not be subject to any customs tariffs. Conversely, the pharmaceutical sector will see customs tariffs rise from 0% (exemption) to 15% (standard tariff, with exemptions, however). The wine and spirits sector did not obtain the hoped-for exemption, despite French lobbying.

The 15% rate also applies retroactively to cars and auto parts from the first day of the month in which the EU initiates procedures to reduce customs tariffs on vehicles from the United States.

Vehicles and auto parts had been taxed at 27.5% upon entry into the US market since March. The rate was retroactively set at 15% at the very end of August.

A separate clause in the joint statement specifies that the EU and the US will begin to collaborate in other areas related to the automotive industry, in particular by “ensuring mutual recognition of their respective standards”.

This mutual recognition remains vague at this stage, but is already raising many concerns about US safety and pollution standards.

Steel and aluminum imports are not covered by the general tariff cap. They remain subject to a 50% duty until the EU and the US begin discussions on cooperation to fight overproduction, particularly from China, and possibly introduce tariff quotas.

In a sign of the immense administrative complexity of the new US customs regime, Italian cheese producers — Parmigiano Reggiano and Grana Padano — have complained to the Commission that certain products continue to be taxed at 30% despite the entry into force of the 15% customs tariff.

Vague promises

The joint statement of August 21 sets out a series of commitments that are still very vague and go far beyond trade discipline — or even simply the EU's powers. These include:

• The EU's commitment to purchase approximately $40 billion worth of US AI chips and $750 billion worth of liquefied natural gas by 2028.
• The $600 billion in investments expected from European companies in the US by 2028.
• The EU's planned increase in purchases of US military and defense equipment.

It is these strategic concessions — more than the trade provisions of the framework agreement itself — that are fueling criticism of Ursula von der Leyen's “capitulation” to Donald Trump.

In a speech delivered in Rimini on August 22, Mario Draghi said: “For years the European Union believed that its economic dimension, with 450 million consumers, would itself bring geopolitical power and leverage in international trade relations. This year will be remembered as the year in which that illusion evaporated.”

In addition, the Commission is committing to review several pieces of legislation — the CSRD, CS3D, the deforestation regulation, and the carbon border adjustment mechanism. The Commission already intends to thoroughly reform these directives and regulations as part of omnibus packages aimed at simplifying the European regulatory environment.

European digital regulation in the spotlight

The EU intends to continue applying its flagship digital regulations, in particular the Digital Services Act (DSA) and the Digital Markets Act (DMA).

The Commission explained: "The Joint Statement does not include any commitment on EU digital regulations. We have made it very clear to the US that changes to our digital regulations – the Digital Markets Act and the Digital Services Act – were not on the table."

A few days after the joint statement, Donald Trump threatened retaliatory measures against countries that apply “discriminatory” rules to US tech companies.

It is therefore highly likely that the issue will be back on the table. For Competition Commissioner Teresa Ribera, the EU must be prepared to walk away from the negotiating table when concluding a formal trade agreement if the US carries out these threats.

But division is already growing within the college of commissioners itself. Yesterday, Google was supposed to receive an antitrust fine in the adtech case but the decision was put on hold. It is rumoured trade commissioner Maroš Šefčovič’s opposed the fine being released yesterday — this triggered significant criticism that the EU is caving under US pressure.

What now?

The new US tariffs are already in effect, and on August 7, the EU suspended its retaliatory (or “rebalancing”) measures adopted on July 24. But at this stage, the agreement is only a political one.

Its implementation on the European side will be carried out in accordance with EU legal procedures, in consultation with Member States and the European Parliament. The Commission wants to move as quickly as possible to improve market access and reduce tariffs in order to obtain reciprocal tariff relief for its strategic sectors.

The timetable and modalities for implementation will be specified shortly. Although the declaration has received the support of the Member States, it is not legally binding and serves as a reference for future negotiations.

DIGITAL EURO • EU finance ministers are accelerating negotiations on the creation of a digital euro, a currency that would be equivalent to cash — the use of which is declining — but in electronic form.

In April, Piero Cipollone, a member of the ECB's Executive Board, summarized the appeal of a digital euro in these terms:

“Online shopping accounts for more than one-third of our retail transactions, but cash cannot be used online and it is often not possible to pay using a European payment service, meaning we need to rely on non-European payment systems. This is a structural weakness that we need to address.”

Within the eurozone, 13 Member States rely exclusively on international payment systems (Visa, Mastercard, etc) for card transactions, and two-thirds of card transactions (all EU Member States) are carried out through international payment systems.

Discussions on the digital euro are intensifying, particularly since the adoption in July of the Genius Act in the United States, which regulates dollar-backed stablecoins and raises fears of their even greater dominance on a global scale.

While several euro-backed stablecoins already exist, the launch of a stablecoin administered by the ECB would strengthen the EU's position in this market.

The Danish Presidency of the Council of the EU aims to adopt a common position of the Member States on this issue by the end of 2025.

MERCOSUR • The Commission is expected to present a legislative proposal on the implementation of the EU-Mercosur agreement this week. The proposal will be discussed by the College of Commissioners today.

The agreement will be divided into two texts. One will cover purely commercial aspects that can be adopted by the Council (by qualified majority) and the European Parliament (by simple majority) as they concern the EU's exclusive competences.

The other will cover areas of shared competence between the EU and its Member States (such as investment protection) and will therefore require ratification by all Member States, which generally involves adoption by the national parliament.

This will allow for the rapid and smooth adoption of the purely commercial aspects of the text. The future of the part of the text that will have to be ratified by the Member States is more uncertain, with France at the forefront.

GPS INTERFERENCE • Last weekend, Ursula von der Leyen's plane was hit by GPS interference as it approached Plovdiv, Bulgaria — a maneuver attributed to probable Russian interference, according to local and European authorities.

The incident occurred during the European Commission President's tour of the states on the front line of the Russian military threat — Latvia, Finland, Estonia, Poland, Lithuania, Bulgaria, and Romania.

The interference did not compromise flight safety: thanks to ground-based systems, the aircraft was able to land without having to change its trajectory.

This type of interference, which involves saturating the frequencies used by satellites, is making civil and military air navigation increasingly difficult. Although Russia has not officially responded, the Commission stresses that this episode illustrates the growing risks facing European states in terms of digital and air safety.

Such acts have already been documented in the Baltic Sea region for several years.

SAFE • The €150 billion European SAFE program has just reached full subscription: nineteen member states, including France, Poland, Italy, and Spain, have reserved all available funds for coordinated purchases of military equipment such as air defense, cyber, and drones, Ursula von der Leyen announced.

The next step is for the Commission to evaluate the projects submitted by the Member States in order to allocate the loans in the best possible way. The loans could start to be paid out by the end of 2025.

• For the FT, Laura Dubois and Chris Cook measure the historic expansion of arms factories within the EU.