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By Daniel Wilson
The European Union is an increasingly important market for US goods exporters. The US Trade Representative reports that US goods exported to the EU have increased 66 percent by value from 2012 to 2022, and more recently have increased 28.8 percent by value from 2021 to 2022.
The EU is second only to Canada in terms of total US exports by value. However, the US-EU trading relationship is not without its difficulties. It has been clouded by a series of seemingly intractable trade frictions that likely will not be resolved in the near term. Additional trade barriers also may be on the horizon if the US and EU cannot align on climate-related issues.
Many of the current tariff barriers facing US exporters are likely here to stay for the foreseeable future. Companies in the agricultural, automotive and wood products industries facing high EU import tariffs likely will not see relief in the near term. The mechanism for lowering these tariff rates would be a traditional free trade agreement. Prior attempts at negotiating a US-EU FTA under the Transatlantic Trade and Investment Partnership stalled long ago. There is no political will on either side of the Pond to resume long-dormant US-EU FTA negotiations.
SMEs looking to enter or expand their presence in the European market also will likely continue to be affected by what USTR has called “persistent” non-tariff barriers for US exports in key sectors including the pharmaceutical, agricultural, and chemical industries. These include so-called EU sanitary and phytosanitary regulatory hurdles that implicitly or explicitly target imports. Many of these non-tariff barriers have been in place for years. The US government has long acknowledged concerns that these measures have a disproportionate effect on SMEs. Unfortunately, despite continued efforts by USTR there is no sign of near-term resolution of these longstanding trade frictions.
Finally, failure of the US and EU to reach consensus on environmental issues could result in in additional tariffs on US exports. Notably, carbon-intensive exports could face tariffs in certain sectors under the EU’s new Carbon Border Adjustment Mechanism, which began phase-in on October 1, 2023.
The EU may also reimpose retaliatory tariffs on imports from the US if the parties cannot meet the October 31, 2023, deadline to conclude negotiations under the so-called “Global Arrangement on Sustainable Steel and Aluminum.” SMEs who might be affected by these issues should monitor the US-EU climate negotiations carefully.
For more information, contact:
Daniel R. Wilson, Partner
Husch Blackwell LLP
1801 Pennsylvania Ave. NW
Husch Blackwell Partner Daniel Wilson has recently been named a Law360 2023 International Trade MVP. Mr. Wilson is a member of the firm’s International Trade & Supply Chain practice team.