Tariffs, a framework agreement between the US and EU: all about the unresolved issues

The night brings counsel. And many interesting details. The Scottish agreement, based on a 15% tariff imposed on almost all EU products traveling to the USA, was signed by Ursula von der Leyen and Donald Trump and avoided the August 1 deadline, which would have meant double the tariffs compared to the outcome. But the sectoral exceptions to the 15%, the first statements from the main players once the dust settled, and some details of the deal help us better understand how it went.

EU: improvable framework agreement

Cautious tones in the European statements right after the Scottish signing: “This agreement provides a framework through which we will further reduce tariffs on other products, address non-tariff barriers, and cooperate on economic security,” President Ursula von der Leyen promptly clarified to journalists. Then she added wise words: “With this agreement we are creating greater predictability for our businesses; in these turbulent times, this is necessary so that our companies can plan and invest.” She concluded with a revealing detail: “The agreement will bring benefits to European consumers and make our companies more competitive.”

USA: the greatest of all deals

Triumphal as usual, President Trump: “It’s the greatest of all deals. It will be the greatest of all deals. This was the most important one, this is the most important of all.” Alternating between present and future, he inadvertently lets slip that the Scotland agreement represents an excellent starting point, but still a starting point—not a destination—for Western trade.

The exceptions: from 0 to 50%

Aircraft, their components, certain chemicals, semiconductors, selected agricultural equipment, and critical raw materials will be exempt from tariffs. The matter is different for alcoholic beverages (wine, liquors). It remains pending and to be defined in detail. On steel and aluminum, however, the heavy 50% U.S. tariff remains. Even though a future move to a special quota system is not excluded.

Pharma, open issue

The first and perhaps most important ghost of the Scottish agreement is the pharmaceutical sector, left out of the agreement. The main reason for this conventio ad excludendum between supply chains should be interpreted through a strategic American lens. On the one hand, pharma in the USA is subject to separate investigations (Section 232), similar to those already applied to metals and semiconductors, requiring the pharmaceutical supply chain to be treated separately. On the other hand, the Trump administration aims to derive immediate commercial benefit from the fact that while finished medicines are excluded, many active pharmaceutical ingredients (APIs), packaging, or equipment used by the European pharmaceutical industry are covered by the Scotland agreement. Thus, U.S. domestic production has been protected to some extent. However, it is not ruled out that Trump may consider new targeted tariffs on pharma, while the EU could propose reactive measures or revise its regulatory and pricing approach to remain competitive, as also reported by The Guardian.

The glass of Western tariffs remains half full. With the Scottish agreement, both sides now view it as half full. But the general feeling about U.S.-EU trade relations is that they remain heavily dependent on the outcome of the Washington-Beijing negotiation—the real Premier League.