EU Proposes to Remove Some U.S. Tariffs to Push for Auto Duty Cuts

TMTPOST -- The European Union is moving forward legislation to implement the trade agreement reached with the United States, laying the foundation for conditional auto duty cuts under the pact.

Credit：European Commission

The European Commission on Thursday announced it is putting forward two proposals paving the way for the implementation of the EU-U.S. Joint Statement on transatlantic trade and investment issued on August 21. The first act concerns a proposal to withdraw tariffs on U.S. industrial goods and provide preferential market access for a range of U.S. seafood and non-sensitive agricultural goods. The second act proposes to to prolong the tariff-free treatment of lobster, now including processed lobster.

Under the proposals, U.S.-produced tomatoes will face lower tariffs, potatoes will be duty free and U.S. pork, cocoa and pizza are applied to tariff-rate quotas, namely, a limited quantity of these goods will be subject to zero or a lower tariff rate. The proposed legislation has excluded Beef, poultry, rice and ethanol.

These proposals are the first steps in said implementation and ensure tariff relief by the U.S. for the vital EU automotive sector starting retroactively from August 1, as they constitute the necessary legislative step to enact the EU's tariff reductions set forth in Section 1 of the EU-U.S. Joint Statement,said the European Commission in a statement.

The European Parliament and Council will now have to approve the two proposals under the ordinary legislative procedure before the EU's tariff reductions can enter into force. It could take several weeks for the EU to complete the legislative process as the proposals are required approval from a majority of EU member states and the Parliament.

The EU will seek to fast track legislation by the end of the week to roll back all tariffs on U.S. industrial goods, as part of efforts to meet the U.S. demand for car tariff cuts, Bloomberg reported earlier this week. It was said that the European Commission will skip conducting an impact assessment — the normal procedure in these situations — on the proposal in a bid to move forward quickl.

According to a Framework on an Agreement on Reciprocal, Fair, and Balanced Trade released by the EU and U.S. last week, Washington commits to apply a maximum 15% tariff on most European goods including cork and other unavailable natural resources, all aircraft and aircraft parts, generic pharmaceuticals and their ingredients and chemical precursors starting September 1.

In exchange, the EU will procure $750 billion in U.S. liquefied natural gas (LNG) and $40 billion in artificial intelligence (AI) chips for its computing centers, while also increasing military equipment purchases. European companies are expected to invest an additional $600 billion across strategic sectors in the U.S. through 2028. In addition, the EU plans to substantially increase procurement of military and defence equipment from the U.S.

Under the framework, the American tariffs on automobile and parts imported from the EU will be capped at 15%, down from the current 27.5% rate, if the EU first introduce legislation to reduce its industrial duties. The mere introduction of EU legislation to reduce the rate of industrial tariffs would be enough to kick-start this trade-off, CNBC cited a senior government official.