US-EU political agreement on tariffs avoids trade war - MEP Ijabs

RIGA - The political agreement between the US and the European Union (EU) on tariffs has avoided a trade war, MEP Ivars Ijabs (Latvia's Development) told LETA.

He stressed that the US and the EU are the two most closely linked economies in the world and that if a 30 percent tariff was imposed on imports from the EU from August 1, as threatened by US President Donald Trump, it would also cost Europe a large share of its gross domestic product.

Ijabs stressed that the agreement between European Commission (EC) President Ursula von der Leyen and the US President has prevented this. However, the politician also added that this was not a major achievement for Europe and that there is still a lack of clarity on a number of issues. The 15 percent tariff on EU exports to the US will affect important sectors of the economy, Ijabs said, but overall it is certainly better than not having this agreement.

Politically, Ijabs said, the EC is accused of agreeing not only to a 15 percent tariff but also to a commitment to buy USD 750 billion worth of energy resources from the US. The MEP stressed that many people do not like this, especially the "European Green Deal enthusiasts". But the liquefied natural gas that is largely in question is something that Europe must buy, and buying it from the Americans is much safer and more sensible than buying it directly or indirectly from Russia, which is still happening, the politician pointed out.

"This is not an achievement for Europe, but it is something we can live with. I understand that big industry in Europe is quite happy, for example the German car industry, because the tariffs are going down with the agreement. Are there any other big gains for Europe? Honestly, no, but we have to wait until Friday when we will have a detailed version of the agreement," said the politician.

Ijabs said that a political agreement has now been reached and the general "lines" are known. He said that pharmaceuticals would also be a key issue for Latvia, i.e. whether the 15 percent tariff would apply to pharmaceutical products. According to the politician, von der Leyen had indicated at a press conference that pharmaceuticals would be subject to the 15 percent tariff, but Trump had elsewhere added that this could be reviewed. The MEP stressed that it was also in Latvia's interests to understand what the agreement would ultimately be. He also said that the next steps would have to wait, but that in a broader geopolitical perspective it was important for Europe to keep the US on its side.

"Stability is now what our economy needs. Some sectors will have to adapt to the new tariffs, which will not be easy. However, this is by no means catastrophic. Of course, we can talk further with the Americans about other issues that are important to us, such as new US tariffs on Russia and Russia's trading partners," the politician said.

In his view, geopolitically, this is of primary interest to Europe, because now that an agreement on tariffs has been reached with the Americans, work can continue on other issues. Ijabs pointed out that in the absence of such an agreement, it would be much more difficult to persuade the Americans to side with Europe on trade as well. The MEP also admitted that Europe would not have an easy time in international trade in the coming years.

"All this context - the rather stressful cooperation with the US since April, the agreement that was finally hammered out - suggests that Europe needs to broaden its range of trading partners with new trade agreements. The EP has two important things on the table that should be concluded - a trade agreement with the Mercosur countries of the South American Economic Alliance and with Indonesia," said Ijabs.

The politician acknowledged that this is not easy because countries have their own interests. If Europe does not want to "put all its eggs in one basket", it needs to work towards more good, mutually beneficial trade agreements not only with North America but also with other regions of the world with which it needs to cooperate, he explained.

The AFP news agency reports that the European Union on Monday vehemently defended its trade deal with President Donald Trump, with EU capitals and businesses sharply divided on an outcome some branded a "capitulation".

"I'm 100 percent sure that this deal is better than a trade war with the United States," top EU trade negotiator Maros Sefcovic told journalists.

European Commission President Ursula von der Leyen clinched the framework accord with Trump Sunday after dashing to Scotland as the August 1 deadline loomed for steep levies that threatened to cripple Europe's economy.

EU exports are now set to face across-the-board tariffs of 15 percent -- higher than customs duties before Trump returned to the White House, but much lower than his threatened 30 percent.

The 27-nation bloc also promised its companies would purchase energy worth $750 billion from the United States and make $600 billion in additional investments -- although it was not clear how binding those pledges would be.

"This is clearly the best deal we could get under very difficult circumstances," Sefcovic said.

Full details of the agreement -- and crucially which sectors could escape the 15-percent levy -- will be known in coming days, although the EU says it has avoided steeper tariffs on key exports including cars and medicines.

But the reaction from European capitals -- which gave von der Leyen the mandate to negotiate -- ranged from muted to outright hostile.

French Prime Minister Francois Bayrou said it was a "dark day" for Europe and said the accord was tantamount to "submission".

Speaking for Europe's biggest economy, German Chancellor Friedrich Merz gave a warmer welcome to a deal he said had avoided "needless escalation".

Industry groups in both countries made plain their disappointment however, with Germany's main auto sector body saying the 15-percent levy "burdens" carmakers while its VCI chemical trade association said the rates were "too high".

Hungary's Prime Minister Viktor Orban attacked the deal in blunt terms, saying "Trump ate Ursula von der Leyen for breakfast".

"It looks a bit like a capitulation," said Alberto Rizzi of the European Council on Foreign Relations (ECFR).

"The EU accepted a fairly unbalanced deal," he added, saying it delivered a "political victory for Trump".

Von der Leyen had faced intense pressure from EU states to strike a deal quickly with the bloc's biggest partner and protect a $1.9-trillion trading relationship.

Defending Brussels' approach, Sefcovic warned that a no-deal scenario -- meaning a 30-percent tariff and the prospect of further escalation -- would have risked up to five million jobs in Europe.

Throughout the months-long talks, Brussels prioritised stability and maintaining good relations with Washington, over escalation.

That line of thinking has support: Italian Prime Minister Giorgia Meloni, a Trump ally, said the deal had avoided "potentially devastating" consequences.