Pharmaceuticals, chips and autos: US and EU clarify terms of trade deal

Washington and Brussels have provided clarifications on key points of the trade deal. The U.S. will not reduce duties on European cars from the current level of 27.5% until the EU passes laws to reduce duties on U.S. goods. At the same time, the US agreed to limit duties on pharmaceuticals, timber and semiconductors to a much lower rate than Donald Trump had threatened to impose.

The U.S. and European Union on Thursday revealed new elements of a trade agreement, including duties on pharmaceuticals and semiconductors, CNBC reported.

According to the document, goods from the EU will be subject to the higher of two rates: the standard most-favored-nation (MFN) duty or a flat fee of 15%, including a basic MFN duty and an additional "mirror" duty - as a response to the EU measures. Meanwhile, as of September 1, the U.S. will retain only MFN duties for a number of import categories, including scarce natural resources (e.g., cork), aircraft and components, generics and their ingredients, and chemical precursors.

A number of duties previously imposed under the National Security Act are capped at 15%. This applies to medicines, semiconductors and timber. Such measures were noticeably softer than Trump's threats to impose 100 percent levies on chips or 250 percent for the pharmaceutical sector. European pharmaceuticals, while remaining the largest source of drug imports to the US, are also subject to a single ceiling - the rate will not add up to other pan-European duties, CNBC writes.

Effective September 1, the Trump administration agreed to apply the MFN pricing policy only to generics. This should reduce the cost of medicines in the US by linking prices to levels set in other developed countries.

A separate block concerns automobiles. The U.S. and the EU have agreed to impose a conditional 15 percent duty on European cars and parts, but only after the EU passes legislation to reduce industrial levies. Until then, the current duty level of 27.5 percent on European cars will remain in place.

The German Automotive Industry Association (VDA), which unites more than 620 companies, warns: even a 15 percent levy will cost German manufacturers billions of dollars annually and will be an additional burden during their technological transformation, CNBC reports.

The agreement also provides for steps on the part of the EU. Brussels has pledged to cancel duties on all industrial goods from the United States and provide preferences for U.S. agricultural and fishery products. Plans to purchase $750 billion worth of American energy resources and $600 billion worth of investments in the U.S. economy were reaffirmed. However, as a representative of the U.S. presidential administration clarified, these amounts are labeled as expected rather than guaranteed. The EU also intends to significantly increase purchases of U.S. military equipment, even despite the course on the development of its own defense capabilities, notes CNBC.

Separately, the agreement does not include changes to the EU's Digital Services Act, which regulates large IT companies and has long been a point of contention in trade negotiations with the United States, the channel noted.

This article was AI-translated and verified by a human editor