Europe Inc wields Trump’s trade war “hurricane” but laments higher tariffs
LONDON (Reuters) – European companies were wondering whether they would support the Hardwing One One US trade deal or bounce back tariffs before President Donald Trump’s second term.
A day ago, European leaders announced a framework trade agreement with the US, which imposes 15% import duties on most EU goods, avoiding a spiral battle between two allies, which make up almost a third of global trade.
The deal is better than the 30% rate threatened by Trump, making it clear to manufacturers of cars, planes and chemicals in Europe, but the baseline tariff of 15% is far above the initial hopes of a zero-zero contract. It is also higher than the US import tariff rate of approximately 2.5% last year.
“People who are hoping for a hurricane are grateful for the storm,” said Wolfgang Gross Entrap, head of the German Chemical Industry Association VCI, who calls for more consultations to reduce tariffs that they say are “too expensive” for the European chemical industry.
“A further escalation is avoided. Still, both parties are priced higher. European exports are losing competitive. US customers pay customs duties.”
It also includes a $600 billion EU investment in the US and a $700 billion EU purchase of US energy over Trump’s second term, but some exemptions will be included even if details are still resolved.
Automakers Volkswagen and Stellantis will face tariffs of 25% to 15%, among other things, under the global collections imposed by Trump in April.
Stellantis shares rose 3.5%, while auto parts maker Valeo rose 4.7% in early trade. German pharmaceutical group Merck Kgaa won 2.9%.
Aircraft and aircraft parts are exempt – Good news for French planmaker Airbus – such as certain chemicals, some generics, semiconductor devices, some agricultural products, natural resources and important raw materials.
Shares of ASML, the world’s largest chipmaker, rose more than 4% among the biggest winners of the Pan-European Stoxx 600 Index.
It’s still being negotiated
Heineken, a Dutch brewer, welcomed the certainty that CEO Dolph van den Brink had brought and supported the deal.
The world’s No. 2 brewer has also sent beer to Europe and Mexico’s US, particularly lagers of its name, and has also suffered from an indirect impact on consumer confidence in important markets like Brazil.
The rates for spirits that could affect companies like Diageo, Pernodricard and LVMH are still under negotiation.
“It appears that there could be a chance that the European and US sectors will have been seeking zeros, specific produce, zero negotiations for zeros,” said Jose Luis Benitez, director of the Spanish Wine Federation.