US–EU close to tariff deal mirroring Japan pact – Financial Times
Following the US-Japan deal on Tuesday, Washington and Brussels appear close to an agreement that would impose 15% duties on European imports, as reported by a copy of the deal struck with the Asian country via the Financial Times (FT).
The European Union (EU) could agree to reciprocal tariffs after Trump delivered a letter with 30% duties, which would take effect on August 1, according to three people close to this matter, who revealed this to the FT.
The FT mentioned that “Both sides would waive tariffs on some products, including aircraft, spirits and medical devices, the people said.”
People familiar with the theme understood that the 15% minimum tariffs would include existing levies. Tariffs on cars, currently at 27.5%, would fall to 15%.
Despite this, the EU will continue to prepare a €93 billion package of retaliatory tariffs if an agreement is not reached by August 1.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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