Economic Consequences of EU-US Trade Agreement Loom for French Industries
The EU-US trade agreement spells significant changes for French exports, with new tariffs and compliance obligations.
Key Points
- • The agreement imposes a 15% tariff on European products and a 50% tariff on European steel and aluminum.
- • EU exports to the US were valued at €48.6 billion in 2024, with small businesses most at risk from tariff hikes.
- • Average tariffs on French imports to the US have surged from 1% to 6.1% recently, raising concerns about their long-term competitiveness.
- • Experts anticipate that the agreement could generate between $80 to $100 billion annually in US tax revenue from tariffs.
The recent EU-US trade agreement, dubbed a pragmatic solution to avert an ongoing trade standoff, has profound implications for the French economy. Among its key features is the introduction of a 15% tariff on European products, coupled with a striking 50% tariff on steel and aluminum imports from Europe. Meanwhile, the EU is set to invest $600 billion in the US, although the details of those investments remain vague. This agreement also obliges the EU to procure $750 billion in US gas and oil over the next three years, effectively tripling current import levels, a task laden with logistical hurdles.
The changing tariff landscape significantly impacts French exports, which amounted to €48.6 billion in 2024, predominantly driven by large firms. However, it's small businesses that may bear the brunt, with increased vulnerability to tariff hikes. The average tariff on French goods exported to the US rose dramatically from 1% earlier this year to an alarming 6.1%. As these tariffs take root, the US could potentially rake in between $80 and $100 billion annually from tariff collections
Despite the imposing tariffs, French exporters maintain an average margin of 35.5%, exceeding the national average of 27.9%. Nevertheless, the divergence in sector performance could result in varying degrees of resilience, with industries such as wine, spirits, and aerospace likely to feel the squeeze. While currently, inflationary impacts in the US from these tariffs remain modest, experts warn about looming medium-term inflation risks as increased costs may be passed down to consumers.