Carlo Altomonte, a professor at Bocconi University and Vice President of ISPI, provided a detailed analysis of the tariff agreement between the European Union and the United States, placing it within a broader geopolitical and trade policy context (ISPI YOUTUBE CHANNEL)
Here are the key points of his intervention:
- Nature of the Tariff Agreement
- The agreement is consistent with the United States’ strategy of signing bilateral trade agreements that openly violate World Trade Organization (WTO) rules, particularly the “most favored nation” clause, which stipulates equal tariffs for all countries.
- The United States, no longer considered a “benevolent giant,” has already negotiated similar agreements with other partners: a 10% tariff with the United Kingdom, a blocked moratorium with China (expected at 30%), and a 15% tariff with Japan.
- The agreement with the European Union also includes a 15% tariff on European exports to the United States, considered comprehensive for most covered products, providing some certainty to businesses.
- A novel element is the “0x0” products, meaning those for which reciprocal liberalization and elimination of tariffs between the EU and the US are foreseen. These include strategic products such as aircraft and their parts, semiconductors, some critical raw materials, and generic drugs.
- Points of Divergence and Implementation Difficulties
- There is no single version of the agreement, with differences between the official communiques from the White House and the European Union.
- 0x0 Products: It will be necessary to negotiate in detail which of the 5500 specific customs codes will fall into this category, requiring very specific discussions.
- Non-Tariff Barriers: Europe feared that the United States would demand, in exchange for lower tariffs, a “release” for large American digital platform companies operating in Europe (regarding privacy, GDPR, fake news, digital taxation). Fortunately, these demands were not included in the negotiation. However, other issues such as the standardization of market access procedures (e.g., sanitary rules for agricultural products) and access to digital networks are mentioned in the White House communique.
- Steel: The EU believes it is negotiating quotas exempt from the current 50% tariff, but the White House communique makes no mention of these quotas.
- Commitments Mentioned by Trump (but not by the EU):
- European commitment to purchase $750 billion of energy goods from the United States over three years (250 billion/year). Altomonte considers this hypothesis “quite lunar,” emphasizing that Europe imports about 400 billion in energy annually and that relying 65% on the US after ceasing dependence on Russia would not be a smart move. Although LNG imports from the US have increased (about 20 billion/year) and Russian oil could be replaced with American oil (50-60 billion/year), the total would not reach 250 billion.
- Commitment by European multinational companies to invest $600 billion in the United States. This is considered more realistic, given that European companies already invest approximately $150 billion per year in the US, and the introduction of tariffs could incentivize the relocation of production.
- Evaluation of the Agreement: “Serene, Compact, and Determined”
- Serene (calm): The agreement is “serene” because 15% is not an “exaggerated” tariff. Evidence shows that the tariff burden has been partly absorbed by American consumers (30%) and importers (50%), with a marginal reduction in profits for European exporters estimated at around 3%.
- Compact: This is where the main problem lies. Europe was NOT compact.
- Many countries (Eastern Europe, Nordic countries for security reasons, large German and partly Italian exporters) felt that it was not worth entering a trade war with the United States, which could threaten security (especially with Russia), currency stability, or control of financial investments (of which the US holds 70% of the market).
- The European Commission did not have a strong negotiating position or a qualified majority to activate retaliation tools.
- Altomonte states that those who criticize Ursula von der Leyen for the agreement should instead criticize the capitals of the member states that did not provide her with a stronger mandate.
- Authoritative: Consequently, Europe’s position loses its authority.
- The Strategic Perspective of the United States
- The negotiation was never purely commercial for the United States. Their objective is to modify their long-term balance of payments and budget, ceasing to be the “world’s final consumer”.
- They want to shift production internally to better compete technologically and industrially with China, rather than depending on others’ exports.
- The European Commission had “one hand tied behind its back” because the United States demanded concessions on issues (such as VAT, access to digital platforms, investments, market access) on which the Commission does not have exclusive competence, but which fall within the prerogatives of the member states.
- The 15% agreement was the “lesser evil” accepted by the Commission to avoid exposing the deep internal divisions within the EU and the lack of political consensus on a new growth model (such as the liberalization of internal services).
- Altomonte warns that the United States will impose its will anyway, including through dollar devaluation, which has a 100% impact on the exporter, unlike tariffs. The dollar has already devalued by 12%, and could continue to do so significantly (citing the 50% devaluation after the Plaza Agreement).
- Ursula von der Leyen’s Leadership
- Altomonte agrees that it was not a “proof of leadership”. However, he suggests that von der Leyen should have exposed the responsibilities of the member states, openly declaring that the 15% agreement was the maximum achievable because the capitals had not given her consent for a tougher negotiating stance. In this way, she would have forced the member states to take responsibility instead of being the “scapegoat”.