The future of EU-US relations

In the past few years the trade relations between the EU and the US gradually became strained. The rift between old allies was created by some unusual factors. Here is a look at the present state of bilateral relations and what the future holds.


The EU and the US are interdependent in many areas. The 2 economies combined produce nearly half of the world’s GDP and account for nearly a third of global trade. As per Eurostat the US was the bloc’s second largest trading partner in 2020. The combined volume of exports and imports amounted to EUR 535 billion.

EU-US relations received a fresh impetus with a new tariff reduction agreement signed in August 2020. The 2 parties will gradually reduce or eliminate tariffs on certain products over a period of 5 years. This is not the same as the Transatlantic Trade and Investment Partnership (TTIP) – a proposed trade pact that has not yet materialized. Negotiations for the TTIP stalled after Trump took office in 2016. However, experts on both sides of the Atlantic consider the new tariff reduction agreement a step in the right direction.

Under the agreement the EU will eliminate tariffs on imports of live and frozen lobster products from the US.  The US plans to reduce tariffs on products such as propellant powders, pre-packed foods, and crystal glassware by 50%. The 2 sides will assign each other the ‘Most Favored Nation’ status. The European Union Trade Commissioner hopes that the tariff reduction will increase market access for hundreds of millions of dollars worth of US and EU exports.

A ‘rules-based international order’

The EU is home to vast communities of international migrants. These expat professionals regularly send remittances back to their home countries via the Ria Money Transfer App and similar channels. Stability and predictability in the economic climate are important to their livelihoods. Right from its inception the EU has based its trade policies on the principle of a ‘rules-based international order’. Several trade organizations and major economies around the world gradually subscribed to this notion. In January 2021 the NATO Secretary General congratulated President Biden for taking office and hoped that US would resume embracing the rules-based international order.

The phrase was first coined after the Second World War. It is one of the tenets on which the UN, the World Bank, and the IMF are based. It encompasses principles of predictability, transparency, non-arbitrariness, non-discrimination, and friendliness to other countries and the environment. The UN affirms positive contribution of the rules-based international order in the expansion of the global economy. The WTO is optimistic that it can set the right course for EU-US relations.

New president, new policies

Under the Trump Administration the US withdrew from the Paris Climate Agreement and reneged on its commitments to WTO. Reuters reported that the WTO found US violating its commitment by imposing higher tariffs. The Trump administration blocked new appointments to the WTO and threatened to withdraw. President Biden has repeatedly voiced his desire to return to the Paris Climate Agreement and reviewing his stand on the WTO. There is also hope of reviving TTIP negotiations, which the Trump Administration had brick-walled in 2016. President Biden was in the Obama administration, and was instrumental in gathering support for the TTIP. Biden has been an avid campaigner for trade liberalization.

In 2018 the Trump administration imposed a tariff of 25% on steel and 10% on aluminum imports from the EU. This sparked a 2-year trade war. The EU retaliated with various tariffs on more than EUR 2.49 billion worth of US exports, including motorcycles and liquor. Biden’s senior foreign policy advisor termed this an ‘artificial trade war’ and a ‘self-inflicted wound’. There is every indication that the Biden administration would attempt a course correction.

An immediate relaxation of tariffs on steel and aluminum imports is unlikely. A former acting US Trade representative in the Obama administration explains why. President Biden campaigned on the ‘Made in America’ slogan. He may face objections from steel and aluminum producing states such as Michigan and Pennsylvania. However, reducing tariffs on imports can convince the EU to reverse the digital sales tax which hurts US tech firms.

A brighter future

President Biden has repeatedly expressed his willingness to work with EU allies and repair the rift in EU-US relations. A US trade representative from the Biden administration has assured that the US will return to the table for negotiating various trade agreements. Most notably the US would revive talks with the EU, the UK, and NAFTA. Business Europe estimates that ending these tariff disputes can expand trade between the 2 regions by 10-15%.

About the author:- Hemant G is a contributing writer at Sparkwebs LLC, a Digital and Content Marketing Agency. When he’s not writing, he loves to travel, scuba dive, and watch documentaries.

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