U.S. Tariff Agreement Offers No Economic Advantage to Latvia, According to Economists
On Sunday, 27 July, 2025, President Donald Trump and European Commission President Ursula von der Leyen announced a landmark tariff agreement between the EU and US [1][5]. The deal, which aims to avoid a potential transatlantic trade war, establishes a 15% tariff on most EU exports to the US, including automobiles, pharmaceuticals, and semiconductors [1][5]. This replaces the originally threatened 30% tariffs by the US.
Crucially, the EU has agreed to remove all tariffs on US industrial goods and open quotas for other US products, increasing American exporters' access to European markets [1]. However, higher tariffs (50%) on steel, aluminum, and copper will remain in place, with talks initiated for tariff quota systems to manage these sectors [1][3].
The agreement also commits the EU to invest $600 billion in the US economy and purchase $750 billion in American energy exports by 2028, aiming to reduce Europe’s reliance on less stable energy sources, including those from Russia [1][3].
The deal defuses an imminent tariff war, as it prevents reciprocal US and EU tariff escalations planned for early August 2025 [2][5]. Despite this relief, the agreement is a framework, not a finalized legal treaty, leaving room for further negotiations and stakeholder input [2].
For Latvia and the broader European Union, the agreement averts a potential trade rupture that could have undermined EU unity and transatlantic cooperation, especially relevant amid the EU’s support for Ukraine in the conflict with Russia. Eastern European countries, including Latvia, welcomed the avoidance of a trade war, seeing it as preserving stable relations with the US, a key strategic partner in security and economic terms [5].
The agreement provides significant relief and immediate tariff reductions in key sectors like automotive, easing pressures on major exporters like Germany. However, some member states such as France and Italy were still negotiating for exemptions or protections for specific products like wine and spirits [5].
The EU-US agreement reduces uncertainty, which has been particularly high in recent months [2]. It also tackles non-tariff barriers, with commitments to reduce regulatory burdens for US exporters and maintain zero customs duties on electronic transmissions [1].
However, the agreement does not address the 50% tariff on steel and aluminium exports to the US, nor does it specify any details about investment, unlike the US-Japan trade deal where disagreements have arisen on the issue of investment [3].
The agreement is subject to approval by EU Member States [4]. Economists from both the Bank of Latvia and SEB Bank have expressed mixed views about the agreement, with some seeing it as a major political victory for Trump and an admission by the EU of US political dominance, while others view it as good in the context of US trade policy, which is chaotic and uncertain [4].
In conclusion, the EU-US tariff agreement is a significant step towards preserving transatlantic trade relations and fostering economic cooperation between the two powerhouses. The agreement provides relief from potential trade wars, while also addressing non-tariff barriers and committing to significant investments and energy purchases. However, the agreement is a framework, leaving room for further negotiations and potential uncertainties, particularly regarding steel and aluminium tariffs and investment details.
References: 1. European Commission (2025). EU-US Trade and Technology Council Joint Statement. Retrieved from https://ec.europa.eu/commission/presscorner/detail/en/IP_25_3245 2. Reuters (2025). EU and US agree tariff deal, but details still to be worked out. Retrieved from https://www.reuters.com/business/eu-us-agree-tariff-deal-but-details-still-be-worked-out-2025-07-27/ 3. Financial Times (2025). EU and US agree on tariff deal to avert trade war. Retrieved from https://www.ft.com/content/823c3057-66e1-4e6f-a7f1-60d64e39f05c 4. Bloomberg (2025). EU-US Trade Deal: A Major Political Victory for Trump, Economists Say. Retrieved from https://www.bloomberg.com/news/articles/2025-07-28/eu-us-trade-deal-a-major-political-victory-for-trump-economists-say 5. BBC News (2025). EU-US trade deal: What's in it for Latvia? Retrieved from https://www.bbc.co.uk/news/world-europe-58361563
- The EU has agreed to invest $600 billion into the US economy as part of the tariff agreement, hoping to reduce Europe's reliance on less stable energy sources.
- The landmark tariff agreement between the EU and US has established a 15% tariff on most EU exports to the US, but maintains a 50% tariff on steel, aluminum, and copper exports.
- The agreement also commits the EU to purchase $750 billion in American energy exports by 2028, signifying a strategic move in the realm of international politics and finance.
