The agreement of an outline trade deal between the EU and the US is positive, to the extent that it avoids the risk of a full-scale tariffs war between the two sides. For Ireland, the EU state most exposed to US trade and investment, this could have been particularly damaging.
What the EU has been dealing with here is damage limitation. Average tariffs of 15 per cent on EU imports into the US - a central part of the deal - are roughly three times the rate that applied when Donald Trump came to office. This will cause economic damage on both sides of the Atlantic. Whatever Trump’s objections are to the way the EU treats US imports, dealing with them this way ensures US consumers will pay more for their goods, as well as damaging Europe.
Trump is claiming the deal, which also includes promises of EU purchases of US energy and military equipment, as a triumph. And he did get a lot of what he wanted. Perhaps driven in large part by the desire to see continued US support for Nato and Ukraine, the EU has been on the back foot. It has been faced by a US president pursuing a relentless tariff agenda, partly driven by economic nationalism and partly by the need to raise cash for the US exchequer.
The main gain for the EU – and for Ireland - of the outline deal is that it avoids the risk of a trade war, which would have had unpredictable and dangerous consequences. Trump had threatened a general tariff level of 30 per cent to apply from next week on EU imports and, had there not been a deal, the EU had a list of US goods ready on which it planned to impose tariffs. This could have escalated quickly, potentially drawing in US digital tech companies, many with international bases in Ireland.
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Details have still to be spelled out on how the 15 per cent tariffs will be applied and these will be important. The impact will vary across different sectors of exporters from Ireland to the US and will be difficult in some areas. It may be some weeks before this is clear.
Importantly for Ireland, Trump has said a separate process examining what should happen to the pharma sector will continue and he again underlined that he wanted key drugs and ingredients made in the US. While there was some uncertainty on this in the immediate wake of the deal, the risk of higher tariffs in this area, or other action to try to get pharma companies to relocate production to the US, appears to remain.
And while European Commission president Ursula von der Leyen said that in general the deal would bring “stability”, the final details have still to be agreed and published. With Trump in office, uncertainty will remain. However, it is still better to have a basic deal which, provided it holds, will now start to restore some level of certainty to trade between the US and EU.
