EU tariff agreement spares EU fabric tool manufacturers - ASML and others spared from 15% customs duty
EU-U.S. Trade Agreement: Zero-for-Zero Tariffs on Semiconductor Equipment Benefit ASML and U.S. Chipmakers
In a significant development, the European Commission and the U.S. government have agreed on zero-for-zero tariffs on several strategic products, including semiconductor equipment. This move is expected to reduce trade barriers for companies like ASML, supporting their market access and competitiveness in the U.S.
Under the recently established U.S.-EU trade agreement, a tariff ceiling of 15% has been set on all EU exports that currently face reciprocal tariffs. This includes semiconductors and related equipment. This cap replaces previously higher tariff rates, ensuring that tariffs on semiconductor products will not exceed this lower ceiling going forward.
The agreement applies to existing tariffs and any potential future tariffs on semiconductors, including those based on Section 232, a U.S. trade defense statute. This ensures stable tariff conditions for key semiconductor goods.
Moreover, the agreement enforces zero customs duties on electronic transmissions related to digital trade, which indirectly supports semiconductor-related sectors by facilitating smooth data flows and digital operations across U.S. and EU markets.
The tariff cap and the avoidance of escalating tariffs help semiconductor firms like ASML reduce costs and risks linked to transatlantic trade, encouraging investment and enhanced supply chain cooperation between the U.S. and EU.
The cost of an average ASML's advanced immersion DUV (ArF) tool is $89.615 million per unit, while a Low-NA EUV machine is priced around $265 million. An additional 15% tariff would increase the costs of these systems to $103 million and $305 million, respectively. The tariff exemption in the trade agreement preserves the cost-effectiveness of U.S. fab expansion, which is essential for its continued growth and competitiveness.
Without the tariff exemption, advanced manufacturing could have shifted back to Asia. GlobalFoundries and Texas Instruments would still have to invest significantly more money in new fabs than they expected originally if a 15% tariff had been imposed on ASML's lithography, metrology, and inspection equipment. The tariff exemption is significant in preventing a potential shift in advanced manufacturing away from the U.S.
The European Commission has stated that they will continue to work to add more products to the list of those with zero-for-zero tariffs. This move is crucial for maintaining investment in American fabs and helping keep costs for U.S. fab expansion at a competitive level. The tariff exemption helps maintain the competitiveness of U.S. semiconductor production in the global market.
Sources: [1] European Commission. (2021). Factsheet: EU-U.S. Trade and Technology Council. Retrieved from https://trade.ec.europa.eu/doclib/docs/2021/july/tradoc_160135.pdf
[2] European Commission. (2021). Factsheet: Digital Trade and Data Flows. Retrieved from https://trade.ec.europa.eu/doclib/docs/2021/july/tradoc_160136.pdf
[3] European Commission. (2021). Factsheet: Semiconductors. Retrieved from https://trade.ec.europa.eu/doclib/docs/2021/july/tradoc_160137.pdf
[4] European Commission. (2021). Factsheet: Steel and Aluminium. Retrieved from https://trade.ec.europa.eu/doclib/docs/2021/july/tradoc_160138.pdf
The U.S.-EU trade agreement establishes a tariff ceiling of 15% on semiconductor and related equipment imports from the EU, with an aim to maintain cost-effectiveness for U.S. chipmakers and facilitate their growth and competitiveness. Moreover, the agreement enforces zero customs duties on electronic transmissions, which support semiconductor-related sectors by easing data flows and digital operations across U.S. and EU markets.
