Tariffs Tamed, Trade Saved

On July 27, President Donald Trump announced the United States had reached a trade deal with the European Union, days ahead of a self-imposed August 1 deadline. The European Union and the United States agreed on Sunday to a broad-brush trade deal that sets a 15 percent tariff on most EU goods, including cars and pharmaceuticals, averting what could have become a painful trade war with a bloc that is the United States’ single biggest source of imports.

Trump met with the European Commission's President, Ursula von der Leyen, during his trip to Scotland over the weekend, where the pair discussed terms and came to an agreement. The United States and the European Union announced a trade agreement Sunday.

The deal includes a 15% tariff on most European exports to the United States, similar to agreements struck recently between Trump and other major trading partners, including Japan. In return, the US will charge 15% tariffs on automobiles and "everything else" from the EU. The 15 percent tariff is half of what Trump threatened would go into effect on August 1 in a letter posted on social media earlier this month.

The agreement also includes $600 billion in EU investments in the US, and the purchase of $750 billion worth of US energy. Trump said that the European Union had agreed to purchase $750 billion of American energy, which Ursula von der Leyen, the president of the EU’s executive branch, told reporters would be spread out over three years. The 27-nation bloc also agreed to increase its investment in the United States by more than $600 billion above current levels, Trump said.

Von der Leyen said, “We have a trade deal between the two largest economies in the world, and it's a big deal.” She added, “It will bring stability. It will bring predictability.” Additionally, Trump said, "I think we both wanted to make a deal. I think it's going to be great for both.” Von der Leyen said the agreement will “rebalance, but enable trade on both sides.”

The two sides also agreed to drop tariffs to zero on a range of goods, including aircraft, plane parts, certain chemicals, certain generic drugs, semiconductor equipment and some agricultural products, von der Leyen said. Not all higher tariffs were eliminated. Trump later clarified that the 15% tariff did not include pharmaceuticals and that the 50% tariff on steel and aluminum will still apply to EU countries.

German Chancellor Friedrich Merz said, “The agreement successfully averted a trade conflict that would have hit the export-oriented German economy hard, [like a 27.5% tariff on cars].”

Ireland’s Trade Minister Simon Harris said the tariff provides certainty in trade that “is essential for jobs, growth and investment.” Harris added, "A deal provides a measure of much needed certainty for Irish, European and American businesses who together represent the most integrated trading relationship in the world.”

The 15 percent tariff rate given to Europe mirrors the main tariff rate of the U.S.-Japanese trade agreement that was announced last Tuesday. The Europeans had also acknowledged Trump’s argument that the trade relationship was unbalanced and needed to be corrected, the officials said.

Despite the recent deals, Commerce Secretary Howard Lutnick said the administration will continue to pursue aggressive tariffs around the world, including potential duties on critical semiconductors in the near future.

Though the agreement leaves many questions to be resolved, it could bring a measure of calm to one of the world’s most important economic relationships and allay fears of an escalating trade war.

Extemp Analysis by: Ty Tan
Question: Will the new US-EU trade deal stabilize transatlantic economic relations or spark further trade tensions?
AGD: I would do a nice topical joke here— something about trade, a European leader, or Donald Trump. There’s a lot of good material for a topical joke that really hooks a joke.
Background: For your background, I would discuss the status quo change that the question implies, and where that may lead. I would go:

1. Trump’s threats of tariffs that destabilized trade relations

2. The new US-EU trade deal and why its good

3. Why some fear this is just a temporary measure that may not be enough to truly protect or be an example that prevents further trade tensions

Answer: Stabilize transatlantic trade (anything that indicates a stabilization is likely correct—though saying it could destabilize may also be viable)

1. Avoid Tariff Escalations

2. Guaranteeing investment and cooperation

3. Setting predictable trade terms 

Analysis + Concluding Thoughts

Overall, this question is rather straightforward in both its premise and answer. Your points though, have to be specific enough to avoid the biggest point pitfall of this question: point bleed. For your first point, I would stick to the obvious of avoiding tariff tensions and thus not leading to some diplomatic crashout. For your second point, I would emphasize the need to have cooperation and investment to have stable trade relations, and why the deal does exactly that. Lastly, I would outline the clear terms of the deal that create a predictable trade environment, one that strengthens the transatlantic alliance in the long term. 

Read more here:

• Ana Swanson, Jeanna Smialek and Melissa Eddy, New York Times

• Savannah Kuchar and Bart Jansen, USA Today