Who wins in the US-EU trade agreement?

Before the 1 August deadline for US-levied tariff structure came into picture, USA and European Union reached a mutual trade agreement. The discussions took place between American President, Donald Trump and European Union Commissioner Ursula von der Leyen.

The announcement of the trade agreement raised many a eyebrows. Was it one-sided? Was it hurried? Does it set a wrong precedent? Yes, and yes. Whom does it benefit? Most experts believe that the unlikely benefactor of the trade agreement is UK! The EU has been levied with 15% tariffs, whereas the UK is facing 10%.

The fact remains that companies across the EU bloc have signaled that their earnings are going to bear the brunt of the tariffs. However, the actual impact might take some time in making an appearance. Some of the sectors that will be impacted by the tariffs include energy, auto and aviation. Take a look at how they will fare…

Auto

The German automakers believe that this is a bad deal and will prove to be a burden. Experts believe that the production of automobiles, spare parts might move to the US or other parts of the world, so as to avoid being hit by tariff. This may result in job losses in EU.

Energy

As per the trade agreement, EU will have to source its oil, liquefied natural gas and nuclear fuel from the US. That would mean spending $750 billion on energy needs, including $250 billion every year. On paper, it’s a good deal for the US oil and gas companies. But the experts point out that it would be difficult to implement it. Why so? First, Meeting the target of oil purchase would be difficult for EU. Second, this would mean that all the American firms will have to direct all their production to the EU, affecting their worldwide customer-base.

Aviation

The aviation sector is more vulnerable to trade barriers. Therefore, the zero for zero trade agreement between USA-EU is good news for aviation sector. The sector has suffered during the dispute between Airbus and Boeing; hence, neither the European or American firms wanted another business war.

Pharmaceuticals

Those companies who manufacture pharmaceutical drugs at cheaper rate are likely to suffer, since their profit margin is narrow. Ireland, which has a big pharma sector, is unhappy with the agreement, because its business may take a big hit. The pharmaceutical companies in Europe expect more clarity on which drugs are likely to fall under zero tariff and which would be levied with 15% tariff.

Technology

Europe has committed to be a big buyer of the Artificial Intelligence chips that US companies manufacture. That’s a win for the America. However, the EU’s continued dependence on the America for chip development might not be good in the long run. Currently, the only EU company to benefit from the zero for zero tariff in chip segment is ASML, a Dutch firm.