Here are some additional details released by the EU and Japanese governments on the announced trade deals with the United States related to how tariffs are expected to be applied.
EU trade deal: Late yesterday the EU Commission released additional details on the announced US trade deal, and noted that the 15% tariff rate to be applied on EU imports into the US is a tariff ceiling and inclusive of MFN duties applied. Operationalizing the 15% tariff rate as a maximum tariff is different than what has been previously reported, which was an additional duty on top of MFN tariffs. Where the MFN tariff rate is higher than the 15% reciprocal tariff rate, then only the MFN tariff rate will be applied. (Note, the deal does not impact US Section 232 tariffs on steel/aluminum, in which 50% on the value of non-US content remains.)
Additionally, the Commission noted that the EU MFN tariffs on industrial goods are generally low, and that it will eliminate these remaining low-level duties on industrial goods from the US, so we anticipate immediate duty-free access for PMMI machinery/equipment into the EU once the deal is finalized and implemented.
Japan trade deal: The Japanese government has also released their own US-Japan trade deal fact sheet. Similarly, it notes that same approach – that the agreed 15% reciprocal tariff rate to be applied on US imports from Japan is a maximum tariff which includes MFN tariffs and only MFN duties will be levied for products in which the MFN duty is higher than the 15% reciprocal tariff rate.
Confirmation from the Administration and tariff cost implications: Please note that neither the EU-US deal nor US-Japan deal have been signed/finalized, and the Trump Administration has not confirmed if this is in fact how U.S. tariffs will be implemented. However, if indeed this is the approach as announced by the EU and Japan, this more simplified, non-stacking approach may be helpful for any equipment, parts, components, etc. sourced from these markets that are not MFN duty-free into the United States, as (a) the tariff cost delta is likely smaller than previously reported and (b) the ceiling tariff may help U.S. importers better track year-to-go tariff cost estimates on products not subject to Section 232 tariffs.
