US President Joe Biden has reportedly agreed to lower the income level caps for the third round of stimulus payments.


LONDON – The US and the European Union may have a truce, but some analysts have doubts whether the two sides can agree on other contentious issues like digital taxation and relations with China.

US President Joe Biden and European Commission President Ursula von der Leyen announced on Friday a suspension of tariffs imposed during the Trump presidency for subsidizing aircraft. The dispute first emerged in 2004, and the World Trade Organization ruled in 2019 and 2020 that the US and EU had provided Boeing and Airbus with illegal assistance, respectively.

Tariffs of $ 7.5 billion on EU products and $ 4 billion on US goods are now on hold for four months as both sides attempt to work out a deal that will provide a permanent solution to support the Aircraft sector.

European officials said the announcement was a “reset” in transatlantic relations after four fragile years under the Trump presidency, but some analysts are not convinced.

“The suspension of tariffs is a first step towards thawing trade relations between Europe and the United States and hopefully a sign that these tariffs will soon be abolished altogether,” Fredrik Erixon, trade expert at the ECIPE think tank, told CNBC on Monday .

“I’m less convinced that the suspension signals an entirely new direction in transatlantic trade, with new agreements in support of greater economic integration.”

Technology giants

A particularly controversial issue is the taxation of some of the world’s largest technology companies.

Last week’s news is good news, and it takes away a short-term risk to the economy that we have always faced over the past four years.

Carsten Brzeski

Economist at ING in Germany

The EU and US have been at odds over this matter for years, as well as security concerns related to 5G. But since Biden arrived at the White House, the EU has been confident that some of these disagreements can be overcome.

In fact, the US opened the door to a digital tax deal that the Organization for Economic Co-operation and Development plans to close this summer.

But Biden hasn’t completely deviated from all of his predecessor’s guidelines. He implemented the Buy American First initiative to incentivize production in the country and boost the economy as a whole as the coronavirus pandemic affects the world’s largest economic power.

In the meantime, the EU has also stepped up discussions on strategic autonomy in order to reduce dependence on certain parts of the world.

“Both sides are increasing their economic protection against the global economy. In the US, for example, through new Buy America guidelines and in Europe through a general campaign to free themselves from technological dependence on the US. Both sides say they want to do this. ” Transatlantic into a new age, but to do that they would first have to solve controversial issues such as digital taxes and friction with new technologies, “said Erixon of ECIPE.

China and Russia

In addition, there are also some sensitivities in dealing with China and Russia.

The EU signed an investment deal with Beijing a few weeks before Biden’s inauguration, amid fears the 27-strong bloc could jeopardize its relationship with the new president. At the same time, some American lawmakers believe that the EU is not assertive enough on human rights issues in China.

The US is also opposed to building a gas pipeline from Russia to Europe and has sanctioned some of the companies involved in the project.

In a press release on Friday, however, von der Leyen said after a phone call with Biden: “We share a strategic outlook on Russia.”

Holger Schmieding, Europe’s chief economist in Berenberg, told CNBC on Monday that the next item on the transatlantic to-do list could be “attempts to defuse the conflict over the Nordstream 2 pipeline”.

Carsten Brzeski, economist at ING in Germany, also said that the tariff suspension “does not mean that everything will be okay, there are still many stumbling blocks ahead of us like Nordstream and how to deal with China.”

In the meantime, European exporters can take a cautious breath at a time when the region is facing a severe economic crisis.

“Last week’s news is good news and takes away a short-term risk to the economy that we have always faced for the past four years,” added Brzeski.