According to CNN, the European Union and Japan signed a trade deal on Tuesday that covers a third of the world’s economy. The new trade deal either decreases or completely eliminates tariffs on almost all goods and is expected to go into effect in 2019.
More specifically, the agreement will eliminate tariffs on exported cheese and wine from Europe and will remove some of the trade barriers that Japanese electronics manufacturers and automakers face in the EU.
The trade agreement reportedly covers “600 million people and almost a third of the global economy” and strongly endorses the current global trading system.
European Council President Donald Tusk referred to the new agreement as the “largest bilateral trade deal ever.”
Tusk released a written statement, saying, “Relations between the European Union and Japan have never been stronger. Geographically, we are far apart. But politically and economically we could hardly be any closer.”
According to the EU’s data, Japan and the EU traded around $152 billion worth of goods in the past year.
Ross Denton, a member of the Baker McKenzie Japanese Practice Group and partner in the Firm’s European Community, Competition & Trade Department, commented that the trade deal sends “a very strong signal to the US Administration that the EU and Japan, two major trade partners of the US, both see the benefits of removing barriers and reducing, not increasing tariffs.”
U.S. President Donald Trump, however, remains very much opposed to the dismantling of trade barriers, preferring to impose even more tariffs on a wide variety of foreign goods.
Just last month, EU trade commissioner Cecilia Malmström announced that the EU was willing to lower some of its tariffs in order to reach an agreement with the U.S.
President Trump quickly shut this proposal down, immediately imposing tariffs on steel and aluminum imports from the EU. And now, Trump is threatening to impose tariffs on European cars and vehicles.
Trump’s decision to pull out of the Trans-Pacific Partnership towards the beginning of his presidency ended up lowering trade barriers and tariffs for the remaining 11 countries still engaged in the partnership, causing global tariffs to reach record lows.
The World Trade Organization claims that products from the EU “currently face an average tariff of 1.6 percent when they arrive in Japan, while Japanese products face tariffs of 2.9 percent in the European Union.”
While these percentages are relatively low, the EU claims that its major companies still have to pay upwards of $1.2 billion in tariffs per year.