The global economy is currently going through a very critical phase. Meanwhile, a news has come from Washington that can create turmoil in markets around the world. Making a major announcement on Friday, US President Donald Trump said that from next week, 25% tariff (import duty) will be imposed on cars and trucks imported from the European Union (EU).
Threat looming on ‘Turnberry Agreement’
Through a post, President Trump has directly alleged that the EU has failed to fully abide by an agreed trade deal. However, he did not elaborate on his specific objections. The announcement is particularly shocking given that just last July, a landmark trade deal was struck between Trump and European Commission President Ursula von der Leyen.
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This agreement is known as the ‘Turnberry Agreement’, named after Trump’s golf course located in Scotland. Under the terms of this agreement, it was decided that tariffs on most European goods would not exceed 15%. Now, the sudden announcement of a new tax of 25% appears to be a direct violation of that previous consensus.
How did the Supreme Court’s decision complicate the entire matter?
The roots of this entire controversy lie in a decision of the US Supreme Court that came earlier this year. Indeed, the deal—originally set for 2025—fell into doubt when the Supreme Court ruled that the president does not have the legal authority to impose tariffs on EU goods or declare an economic emergency. Initially, a tariff cap of 15% was set for European goods; However, after the Supreme Court decision, this limit was reduced to 10%.
Since then, the Trump administration has tried to find a way through other legislation to launch a new campaign to impose import tariffs. Currently, the Trump administration is in the process of implementing a new tariff regime ostensibly aimed at addressing trade imbalances and reducing national security risks. The results of this investigation could completely destroy the agreement with the EU.
What will be the impact on the world’s largest trade relationship?
If these new tariffs are implemented, the economic consequences will be far-reaching. From a consumer perspective, the rising prices of cars and trucks in the US will have a direct impact on transportation and logistics; This will disrupt the global supply chain and may start a new wave of inflation.
If we look at the figures, the total trade in goods and services between the US and EU in 2024 will be 1.7 trillion euros (about $2 trillion). This represents a whopping 4.6 billion euros of trade each day, according to Eurostat, Europe’s statistics agency. The EU estimated that this bilateral agreement would save European carmakers around 500 to 600 million euros every month. Due to Trump’s latest decision, this huge savings is now under direct threat.
“A compromise is a compromise” – Europe remembered the old promise
The European Union is also not ready to back down on this issue. Following the Supreme Court’s decision, the European Commission had made its stand clear in February itself and had said that “a compromise is a compromise.” He has clearly said that since the US is his largest trading partner, he expects the US to follow through on the promises made in their joint statement. Europe has made it clear that its products should continue to receive the most competitive trade facilities, and no tariffs should be increased beyond pre-established limits.
