EU Pauses US Trade Deal Over New Tariffs
The European Union has suspended its trade deal with the United States after the U.S. administration announced a 15% global tariff. While EU and UK exports are temporarily spared, the EU's trade chief Bernd Lange stated the U.S. is in breach of their agreement. The EU has warned it is prepared to retaliate if the tariff policy remains, creating uncertainty for transatlantic luxury brands.
- The now-suspended trade deal, known as the Turnberry Agreement, was struck in July 2025 and established a 15% tariff cap on most EU goods imported by the U.S. - This new 15% global tariff was announced after the U.S. Supreme Court ruled on February 20, 2026, that the President could not use the International Emergency Economic Powers Act of 1977 (IEEPA) to unilaterally impose tariffs. The new tariff is authorized under Section 122 of the Trade Act of 1974 and is effective for 150 days unless extended by Congress. - The EU is concerned because this new global tariff is applied on top of existing rates, which for many goods would exceed the previously agreed 15% ceiling. - Some countries will see their tariff rates decrease under the new flat 15% structure; Brazil faces a reduction of 13.6 percentage points and China a reduction of 7.1. - In response to previous U.S. tariffs on steel and aluminum in 2018, the EU retaliated with tariffs on iconic American products such as bourbon whiskey and Harley-Davidson motorcycles. - The EU possesses a tool called the Anti-Coercion Instrument (ACI), which could be used to retaliate against the U.S. and could cover trade in goods, services, and intellectual property rights. - Luxury goods companies like LVMH have previously engaged in backchannel diplomacy, urging Brussels to seek compromise over confrontation to protect the sector's significant reliance on the U.S. market. - The personal luxury goods market, which saw a 2% decline to $402 billion in 2024, is particularly vulnerable to this trade uncertainty, as brands may be forced to raise prices for American consumers.
