US-EU trade deal welcomed but questions remain as to whether it delivers certainty

Dr Totis Kotsonis, trade law expert at Pinsent Masons, and a European Commission approved arbitrator for bilateral trade disputes under EU trade agreements, was commenting following the announcement, with the new deal aimed at averting a fresh wave of even higher tariffs and stabilising transatlantic economic relations.

“In truth, uncertainty remains as to the extent to which all of the agreed commitments will be fully implemented or be long-lasting,” said Kotsonis.

European Commission President Ursula von der Leyen described the agreement as a “constructive step forward” in maintaining open trade channels between the US and EU. The deal follows months of negotiations, triggered by the Trump administration’s renewed push for protectionist measures, including threats of sweeping tariffs on EU exports.
Kotsonis said: “The deal is better than no deal on the basis that President Tump was threatening that the US would put in place even higher tariffs if a deal with the EU was not agreed. That said, the result is a deal that leaves EU exporters at a disadvantage.”

Under the new agreement, certain EU goods will face a baseline tariff of 15%, which is higher than the baseline tariff of 10% that currently applies to EU goods and which applies under the US-UK trade deal. Some EU businesses might consider relocating production to the US or UK to mitigate tariff impacts – though Kotsonis cautions that such moves may not be economically viable for most.

“Manufacturing in the US is generally more expensive, and the relatively small tariff difference with the UK is unlikely to justify a shift in operations for most firms, not least in the context of concerns that US tariff policy remains unpredictable and might yet change, whether in relation to the UK, the EU or other trade partners with which the US has struck a trade deal,” he said.

“The EU could have taken a more robust approach, similar to China’s strategy of threatening countermeasures. Instead, it opted for caution. No doubt, considerations over the risk of such approach upsetting further the already fraught transatlantic relationship would have played a big part in that decision. In other words, this was a strategic choice. Unlike China, the EU had to weigh the geopolitical risks of escalating tensions with the US, its most important strategic partner on which it still relies for its security.”

Kotsonis added: “Ultimately, the value of the deal lies primarily in the fact that it has averted the escalation of the US-EU trade dispute into a full trade war which would have been particularly damaging strategically for the latter. Whether the deal now heralds the beginning of a more stable environment in EU-US trading remains to be seen.”

Japan, which signed a trade deal with the US last week, is reportedly dissatisfied with how the US is now interpreting certain important provisions of that deal. Similarly, the UK is still negotiating aspects of its May agreement. The Trump administration has also already made it clear that its ongoing national security investigation into pharmaceutical imports might yet affect how the US-EU trade deal is implemented.

“All these considerations might suggest that the long for certainty that businesses on both sides of the Atlantic have been seeking might not have been fully delivered by the deal,” said Kotsonis.