VINACHEM

The US will impose much lower tariffs on EU imports of chemical precursors, while it will maintain elevated rates on auto imports, according to details released on Thursday of their trade framework.

The US did not specify the precursors. However, it does import benzene, paraxylene (PX) and methylene diphenyl diisocyanate (MDI) from the EU among other chemicals.

Thursday’s announcements provide details about the commitments each side made under last month’s more general agreement.

US COMMITMENTS

The US will cap many EU imports at a 15% tariff rate or at its most favored nation (MFN) rate – whichever is higher. The US will not stack the 15% tariffs on top of the MFN rates.

The US will cap its tariff to 15% on EU imports of pharmaceuticals, semiconductors and lumber. These imports would have otherwise been subject to any additional tariffs that the US imposes following the investigations it is conducting under Section 232.

The US will lower its tariffs on EU imports of automobiles and auto parts to 15% once the EU eliminates tariffs on all US imports of industrial goods. Until then, the US will continue to impose its Section 232 tariffs of 25% on these imports. Other tariffs can bring the total rate to up to 27.5%.

There are some imports on which the US will impose the typically lower MFN rate instead of the 15% duty. The following producers qualify for this lower tariff rate:

Chemical precursors. The US and the EU did not specify the precursors. The average MFN rate on US imports of chemicals is 2.7%.

Natural resources that are not available in the US, such as cork.

All aircraft and aircraft parts.

Generic pharmaceuticals and their ingredients.

The US will consider other imports that could fall under the lower MFN rate.

The US will preserve its 50% tariffs on steel, aluminium and derivatives that it imposed under Section 232. However, it and the EU will consider cooperating on ring-fencing their domestic markets from overcapacity while ensuring secure supply chains between each other. This could include tariff-rate quotas.

EU COMMITMENTS

The EU plans to eliminate tariffs on all industrial goods from the US. The EU said the reduction will save importers almost €5 billion.

The EU plans to import $750 billion worth of US imports of LNG, crude oil and nuclear energy products through 2028.

The EU intends to buy at least $40 billion of artificial intelligence (AI) chips from the US for its computer centers.

The EU will invest an additional $600 billion into what the US considers its strategic sectors through 2028. The US did not identify these strategic sectors.

The EU will substantially increase purchases of military and defense equipment from the US. The agreement did not specify an amount.

The EU intends to provide preferential market access to a wide range of seafood and agricultural products from the US, such as tree nuts, dairy products, fresh and processed fruits and vegetables, processed foods, planting seeds, soybean oil, pork and bison meat.

The EU plans to extend an earlier 2020 agreement to cover lobster and processed lobster.

The EU and the US will work to address what the US considers to be non-tariff barriers on imports of food and agricultural products. These steps could include things like streamlining requirements for sanitary certificates for pork and dairy products.

The EU said sensitive agricultural products such as beef, poultry, rice and ethanol are not covered by its offer. “From the outset, our position has been that liberalization from the EU side does not concern any sensitive agricultural products,” the EU said.

The EU will recognize that some commodities from the US pose little risk to global deforestation, and it will address US concerns about the bloc’s EU Deforestation Regulation.

The European Commission will provide more flexibility to its Carbon Border Adjustment Mechanism (CBAM) and address US concerns about the effects that the regulation will have on small and medium businesses.

OTHER EU COMMITMENTS

The EU will take steps to prevent the prevent any reductions in US imports that could be caused by the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD).

The EU will consult with the US on digitization of trade procedures and implementing legislation being proposed on EU Customs Reform.

AREAS OF JOINT ACTIVITIES

The US and EU will find ways to reduce or eliminate non-tariff barriers.

The two will negotiate an agreement on cybersecurity.

The two will cooperate on their response to China’s export restrictions on critical minerals.

The two will cooperate on protecting and enforcing intellectual property as well as eliminating forced labor in their supply chains.

The two sides will not adopt or maintain network usage fees or impose customs duties on electronic transmissions as part of a move to address unjustified digital trade barriers.