Did The EU Win or Lose with their US Tariff Deal?

Yesterday, the EU and the US announced a tariff deals on EU exports to the US at 15%.

This is lower than the UK deal at 10% but is much better than many.  After the initial euphoria with markets climbing in the UK to new records and also up Europe, they have today started to fall away as certain industries believe they may have been ‘sold up the river’. 

Where Has the EU Won?

Overall, known tariffs offer certainty but there is a downside in that France, Germany and Ireland may take the biggest hits but trades in other countries may benefit.

Not in many places.  Strategic andf co-operative trade areas only such as aviation are exempt from tariffs and so are winners.

Stock markets were initially winners but we suggest they may lose.

Where has the EU Lost?

As mentioned, we suggest France, Germany and Ireland are the losers. 

Car makers in France and in particular in Germany are the biggest losers.  15% tariffs on German car exports are going to hit both the normal car markets withing Volkswagen but also the luxury end for Audi, BMW, Mercedes and Porsche.

Wines may attract lower tariffs, so that may benefit France, Spain and Italy.

Ireland will lose on pharmaceuticals, given so many pharma groups now headquarter in Ireland for lower corporate taxes, but President Trump has pledged to cap tariffs to only apply to 15% of pharmaceutical goods.

The EU has also had to comitt to importing $750bn of US energy.

Has the USA Won?

On commitments from the EU to ‘buy American’ for energy alonsgide an additional c£57bn pa in tariff income at 15% on £380bn of exports to the US.

President Trump has won, US companies and therefore stock markets should win, eventually, but the US consumer has lost given purchases of EU goods in the US may be 15% more expensive unless the EU cuts prices to counter the tariffs.

Ciomment

Overall, we think President Trump is ‘playing a blinder’.  Fan or not, US exports have long suffered tariffs and import duties in many countries whilst those countries taxing US goods have grown by selling into the US without the same tariff restrictions.  Those days are over.

Looking at the bigger pictture, this is an excellent way to drive prices up, keep inflation higher and thereby devalue good debt over the longer term.  We said all through the pandemic and massive governmemt borrowing around the world, that inflation would devalue covid-19 borrowing.