FRANKFURT, Aug 20 (Reuters/AFP): The trade deal between the US and the EU is close to the baseline assumed by the European Central Bank, but uncertainty persists in key sectors like pharmaceuticals and semiconductors, ECB President Christine Lagarde said on Wednesday.
The EU accepted 15 per cent tariffs on most items in the deal agreed last month, averting an all-out trade war and providing businesses greater clarity, even if the new barriers slow economic growth.
"The trade deal establishes an effective average tariff estimated to lie between 12 per cent and 16 per cent for US imports of euro area goods," Lagarde said in Geneva.
"This effective average tariff is somewhat higher than - but still close to - the assumptions used in our baseline projections last June," she said. "The outcome of the trade deal is well below the severe scenario for US tariffs of over 20 per cent."
The ECB's baseline projection assumes economic growth of 1.1 per cent next year while the "severe" outcome would have lowered this to 0.7 per cent, the ECB's June projections show.
The US-EU trade deal is still likely to weigh on economic growth, Lagarde added, saying a long-predicted slowdown was already evident in second-quarter economic data.
The EU, which has always relied on extensive foreign trade for growth.
, should now diversify its trade with other nations to maintain growth and offset the negative impact of tariffs, Lagarde said.
"While the United States is - and will remain - an important trading partner, Europe should also aim to deepen its trade ties with other jurisdictions, leveraging the strengths of its export-oriented economy," she said.
Meanwhile, the United States has agreed to Brazil's request to enter talks with the World Trade Organization (WTO) to discuss the 50 per cent tariffs imposed by Washington, according to a recent letter.
Brazil approached the global trade body in early August after President Donald Trump raised duties on more than a third of US-bound exports from the Latin American powerhouse, including key items like coffee, beef and sugar.
Trump hit Brazil with some of his highest tariff rates as punishment for what he calls a "witch hunt" against his ally, former far-right president Jair Bolsonaro, who is on trial for allegedly plotting to attempt a coup.
"The United States accepts the request of Brazil to enter into consultations," read a letter dated August 15 from the Washington WTO delegation and published on the organization's website.
