The European Union and the United States are heading towards a trade deal that would result in a broad tariff of 15% applying to EU goods imported into the United States, two diplomats said today.
The rate, which could also extend to cars, would mirror the framework agreement the United States has struck with Japan.
The European Commission has said it remained focused on achieving a negotiated outcome in trade talks with the United States.
It comes as the EU Trade Commissioner Maros Sefcovic is due to speak with US Commerce Secretary Howard Lutnick this afternoon, as Brussels seeks to seal a deal by August 1 to avoid steep tariffs.
“While our priority is negotiations, we continue in parallel to prepare for all outcomes including potential additional countermeasures,” the European Commission said in a statement.
“The EU’s primary focus is on achieving a negotiated outcome with the US. Intensive technical and political level contact is ongoing,” said European Commission trade spokesman Olof Gill.
15% tariff from US would be a ‘big challenge’ – Burke
Minister for Enterprise, Tourism and Employment Peter Burke said a 15% tariff from the US would not be comparable to the banking or Lehman Brothers collapse, but it would be a “big challenge”.
Speaking on RTÉ’s Today with Philip Boucher Hayes, he said: “We really would have to try or best in so far as possible to protect capital expenditure.
“But at 15% if I was to visualise it for your listeners, you are talking about between one and a half percent of a reduction in GDP. You’re talking about potentially around 35,000 jobs less created in the economy.
“That’s not in a job losing potentially situation as of yet.”
Minister Burke also said that he has brought a trade diversification strategy to Cabinet which is “key to ensure that we are diversifying, but also we are very clear that the US is going to be a very important market into the future”.
Meanwhile, US President Donald Trump has said he would use import restrictions to force foreign suppliers to cut drug prices and that pharmaceutical companies would have a lot of problems if they did not agree to bring prices down.
Speaking at the White House at an event with Republican politicians, Mr Trump pledged to reduce what consumers must pay for prescription drugs.
Donald Trump said he would use import restrictions to force foreign suppliers to cut drug prices
The US is the biggest market by sales for big pharma companies, and Europe and the US have interconnected supply chains for medicines with the pharmaceutical sector employing around 45,000 people in Ireland.
Total Irish exports were valued at €223.8 billion last year, with roughly one third going to the US.
Of the €72.6 billion in US imports from Ireland, approximately €58 billion relates to pharmaceuticals and chemicals leaving Ireland.
Watch: Donald Trump says he will use import duties to reduce cost of medicines
Pharmaceutical companies have previously expressed concern about the threat of tariffs and what they would mean for investment in Europe.
In April, a number of pharmaceutical companies sent a letter to EU Commission President Ursula von der Leyen, warning that the EU could lose €100bn in new investment unless there is a rethinking on regulation and pricing.
The letter was sent by around 30 CEOs of some of the largest pharmaceutical companies in the world.
Trump announces ‘massive’ Japan trade deal including 15% tariff
Mr Trump earlier announced a “massive” trade deal with Japan, cutting a threatened 25% tariff to 15% ahead of a 1 August deadline.
Mr Trump has vowed to hit dozens of countries with punitive tariffs if they do not strike a deal with the United States by next month.
So far, the US president has only announced pacts with Japan, Britain, Vietnam, the Philippines and Indonesia, while talks continue with other trade partners.
“We just completed a massive Deal with Japan, perhaps the largest Deal ever made,” Mr Trump said on his Truth Social platform.
Mr Trump said that under the deal, “Japan will invest, at my direction, $550 Billion Dollars into the United States, which will receive 90% of the Profits.”
He did not provide further details on the unusual investment plan, but said the deal “will create Hundreds of Thousands of Jobs.”
Japanese imports into the United States were already subject to a 10% tariff, which would have risen to 25% on 1 August without a deal.
Duties of 25% on Japanese autos – an industry accounting for 8% of Japanese jobs – were also already in place, as well as 50% on steel and aluminum.
Japanese Prime Minister Shigeru Ishiba said in Tokyo that the autos levy was cut to 15%.
Donald Trump has vowed to hit dozens of countries with punitive tariffs if they do not strike a deal
“We are the first (country) in the world to reduce tariffs on automobiles and auto parts, with no limits on volume,” he told reporters.
“We think it is a great achievement that we were able to get the largest cut (in tariffs) among countries which have trade surpluses with the US,” he said.
US-bound shipments of Japanese cars tumbled 26.7% in June, stoking fears that Japan could fall into a technical recession.
Last year vehicles accounted for around 28% of Japan’s 21.3 trillion yen ($142 billion) of exports to the world’s biggest economy.
To Mr Trump’s annoyance, US-made cars sell poorly in Japan, with only hundreds sold annually for the likes of General Motors, compared to millions of Toyotas bought by US motorists.
The US president also wanted Japan to increase imports of rice, the price of which has soared in recent months in the Asian giant, and of US oil and gas.
However, Mr Trump said that Japan has agreed to “open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things.”
Rice imports are a sensitive issue in Japan, and Mr Ishiba’s government – which lost its upper house majority in elections on Sunday – had previously ruled out any concessions.
Mr Ishiba said that the deal does not sacrifice Japan’s agricultural sector.
He has also denied he had decided to quit after a source and media reports said he planned to announce his resignation to take responsibility for a bruising upper house election defeat.
