July brought months of trade negotiations to their climax, concluding with a framework agreement on the 27th. But the news didn’t stop there. In August, the Joint Statement landed, President Trump reignited tariff threats over digital regulation, the European Commission tabled its tariff reduction proposals and a US federal appeals court ruled against most of the administration’s tariffs, elevating the question of their legal basis to the Supreme Court. All in the space of two weeks.
The Turnberry Agreement has not been without controversy. In Brussels and European capitals, the backlash has been fierce, with critics branding the Framework Agreement as Europe’s ‘capitulation’. Yet, AmCham EU and other business voices have had a different reaction: cautious support.
Is that because AmCham EU thinks this deal is perfect? Far from it. We want to see a zero-for-zero tariff zone across the Atlantic. Since February, when the US administration began threatening tariffs against the EU, we have consistently voiced our opposition to them. Tariffs disrupt supply chains and raise prices for businesses and consumers. For our members, trading across the Atlantic was cheaper and more certain a year ago.
However, the trading arrangement from a year ago was not on the negotiating table. Let’s not lose sight of what the alternative was. Without a deal, the US would have imposed broad-based 30% tariffs on EU imports. The EU would then have responded with countermeasures on €93 billion worth of US goods. These steps alone would have severely harmed both economies, and in all likelihood the tit-for-tat would not have stopped there. The potential for escalation into a full-blown trade war – with services entering the picture and tariff rates breaking into triple digits – was very real indeed. That would have caused untold damage not just to transatlantic trade, but also the company operations and investment flows that power the €8.7 trillion transatlantic marketplace.
Ultimately, the deal the EU and US reached is imperfect, but it’s a start. 15% US tariffs on EU imports will substantially raise the cost of trading across the Atlantic. And because transatlantic supply chains are so closely integrated, there will be no winners. 64% of US imports from the EU+UK is intra-firm trade – in other words, companies trading with themselves. US tariffs will therefore result in price hikes for European and American companies alike.
This is not the situation we wanted, but it’s still workable compared to what could have been: a prohibitive tariff rate of 30%, or higher if a trade tit-for-tat got underway. Under the deal, tariffs are capped and escalation has been averted. Other major US trading partners face similar or tougher terms, meaning EU exports won’t be at a competitive disadvantage.
Now, on both sides of the Atlantic, the task is implementing the deal and respecting its terms. The Commission has already got the ball rolling with its two tariff reduction proposals, and the US has followed suit by introducing an Executive Order that puts the implementation of the Agreement into motion. The EU and the US should maintain this momentum. Reopening the deal or delaying its implementation, in Brussels or Washington DC, will only plunge businesses into deeper uncertainty. In particular, disagreements over a single piece of legislation – such as those raised over the EU’s digital rulebook – should not be allowed to derail a wider agreement. The EU and the US must respect each other’s regulatory autonomy.
Rather than going back to square one, the path that provides the best foundation for restoring much-needed predictability is the one that builds on the deal we have. The Framework Agreement leaves opportunities to expand the zero or near-zero tariff list and envisages strengthened cooperation in defence, energy and supply chain security. It paves the way for closer cooperation on cybersecurity, conformity assessment, IP protection, investment review and more. These are all areas that will bring direct and tangible benefits to both economies. Even amid tensions, the transatlantic economy remains the world’s largest and most consequential commercial partnership. This Framework Agreement is a starting point for taking fuller advantage of that shared strength.
