US Customs Tariffs: Negotiations with the European Union Continue Behind the Scenes

The European Commission announced Tuesday that it was suspending until further notice its retaliatory measures against the customs duties imposed by Donald Trump. Talks are continuing, and in addition to the major agreements, it is sometimes necessary to read between the lines.

It's not easy to see clearly in the negotiations, as Brussels announced on Tuesday, August 5 , that it was suspending its retaliation against Donald Trump's customs duties, due to the trade agreement between the United States and the European Union . The devil is in the details, and each sector is careful not to say more about its strategy.

We must not give any arguments to the enemy, or simply play on the few remaining margins for negotiation with a devious and unpredictable President Donald Trump, capable of saying anything and everything in the space of a few hours. Especially since some sectors are much more sensitive than others and everyone is moving forward with muffled steps.

While the aeronautics sector is—for now—exempt from increased taxes, others are less well off. And then, some high-value-added companies will be able to play more easily in their markets to cushion the shock of taxes on finished products sold on American soil. The balance of power will also be established based on competition. For an equal product, the American product will normally be favored over the product imported from Europe.

It's difficult to know how discussions are progressing in the automotive or wine and spirits sectors. These sectors fear the negative effects of customs duties on their competitiveness and employment. They are currently making their calculations. We know, for example, that the luxury sector has greater room for maneuver than cosmetics, chemicals, or tools. And then there are few groups that admit to considering setting up directly in the United States to produce locally, in order to avoid having to bear customs duties on products manufactured in Europe and then imported and taxed in the United States. The temptation to leave is also to take advantage of the low corporate taxes promised by Donald Trump.

Let's take two specific cases: L'Oréal in cosmetics and Sanofi in pharmaceuticals. L'Oréal, the French giant, generates nearly 40% of its revenue in the United States, and its CEO, Nicolas Hieronimus, has suggested that the group could relocate part of its production to American soil. No further details are available at this stage.

Sanofi's pharmaceuticals are among the most exported products to the United States (€120 billion last year, 22% of total exports, according to Eurostat). The French pharmaceutical giant announced in May that it would invest $20 billion in the United States by 2030. Other entrepreneurs are tempted to follow suit, but they remain discreet to avoid attracting the wrath of the Minister of Economy and Finance, Éric Lombard, who constantly invokes respect for French and European sovereignty.