Executive summary

This edition of Trade Talking Points provides updates on:

• The election of Donald Trump as United States (US) President and latest US tariff announcements.
• Confirmation of the next World Trade Organization (WTO) Director-General
• China's launching WTO dispute proceedings against the European Union's (EU's) measures on electric vehicles and ongoing EU-China trade tensions
• United Arab Emirates' (UAE's) free trade agreements
• UK-EU Competition Cooperation Agreement
• EU's adoption of the Forced Labor regulation
• Extended use of Pan-Euro-Mediterranean (PEM) origin certificates
• Conclusion of the Agreement on Climate Change, Trade and Sustainability

Election of Donald Trump as US President

In the 2024 US presidential election, Donald Trump was elected as the 47th President of the United States. President-elect Trump will be sworn into office on 20 January 2025. Trump's presidency is expected to have significant implications on trade, due to his "America First" trade policy, which emphasizes the use of tariffs to protect against deemed threats to US national security. (See EY Global Tax Alert, United States election outcome — potential impact on global trade, dated 6 November 2024.)

On 25 November, US President-elect Trump announced on social media that he would be signing an Executive Order on the first day of his presidency implementing a 25% tariff on all products imported into the US from Mexico and Canada, as well as adding another 10% on Chinese products on top of the 60% in additional tariffs he had spoken about during his campaign. Meanwhile, he has nominated Jamieson Greer as US Trade Representative. (See EY Global Tax Alert, United States President-elect discusses tariffs on Canada and Mexico, and additional tariffs on China, dated 27 November 2024.)

Mexico's President Sheinbaum responded by indicating that Mexico would retaliate with its own tariffs and Canadian Prime Minister Justin Trudeau traveled to meet with President-elect Trump. Since the social media posts, US President-elect Trump and Mexican President Sheinbaum have spoken and agreed on measures to control illegal immigration, although the status of the potential tariffs remains uncertain.

On 30 November, US President-elect Trump announced on social media that he would implement a 100% tariff on products originating in BRICS countries (Brazil, Russia, India, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates). During his previous presidency, Trump imposed tariffs on a range of Chinese goods, such as washing machines and solar panels, and global tariffs on steel and aluminum. The President-elect has expressed a strong intention to increase tariffs, citing a 20% universal tariff on all imports into the US, a 60% tariff on Chinese imports and company-specific tariffs for those with offshore manufacturing capacity.

Businesses seeking advice on how best to prepare for this potential tariff agenda should get in touch with their trade advisors.

Next WTO Director-General

On 29 November, the General Council of the World Trade Organization (WTO) agreed by consensus to reappoint Dr. Ngozi Okonjo-Iweala as Director-General for a second four-year term, set to begin on 1 September 2025.

EU-China trade tensions

On 4 November 2024, China announced that it had launched a dispute at the WTO against the EU's tariffs on electric vehicles (EVs) made in China. On 29 October 2024, the EU finalized its decision to impose duties on imports of battery EVs from China, thus concluding the anti-subsidy investigation that was launched by the European Commission in September 2023. Definitive countervailing duties will be placed on Chinese exporters of battery EVs for a period of five years.

China has requested consultations with the EU, which is the first step in a WTO dispute settlement. This stage lasts for 60 days, after which a panel may be requested to adjudicate the dispute. However, the WTO Appellate Body which follows a panel ruling has not been functioning since 2020 and is currently in a state of limbo due to the US blocking the appointment of new judges.

Meanwhile, China's Commerce Ministry has said that it is expanding the scope of its anti-subsidy investigation into dairy products from the EU to cover additional EU subsidy programs, as well as country-level programs in Denmark, France, Italy and the Netherlands.

The EU has formally initiated dispute settlement proceedings at the WTO over China's provisional anti-dumping measures imposed by China on imports of European brandy.

UAE free trade agreement update

Recent developments in the UAE's free trade agreement negotiations include:

• Australia: On 6 November 2024, the UAE and Australia signed a comprehensive economic partnership agreement (CEPA), currently the UAE's most liberalizing trade agreement. More than 99% of Australia's exports to the UAE will benefit from tariff-free trade. An Investment Agreement was also signed alongside the CEPA, as well as five Investment Memoranda of Understanding to support an increase in two-way investment.
• New Zealand: The UAE's CEPA with New Zealand was concluded in September 2024. It is expected to be signed and enter into force in 2025. Concurrently, New Zealand has concluded its FTA negotiations with the Gulf Cooperation Council, of which the UAE is a member.
• Vietnam: The UAE and Vietnam have signed a CEPA. This is the first free trade agreement that Vietnam has signed with a Middle Eastern country. Under the CEPA, the UAE will phase out tariffs on 99% of Vietnam's exports and Vietnam will remove tariffs on 98.5% of exports from the UAE.

Businesses trading between the UAE and any of the jurisdictions with which it has now formed free trade agreements should assess how they, and their ability to trade effectively, may benefit from the new CEPAs.

UK-EU Competition Cooperation Agreement

On 29 October 2024, the UK and EU formally concluded technical negotiations on the UK-EU Competition Cooperation Agreement, allowing for more effective enforcement of competition laws by improving cooperation between the UK's Competition and Markets Authority (CMA) and the EU's competition authorities. This agreement supplements the UK-EU Trade and Cooperation Agreement and will allow national competition authorities of EU Member States and the UK CMA to cooperate directly in competition investigations.

The agreement is expected to be signed in 2025. The UK and EU must first finalize their ratification procedures, after which the agreement can be signed and enter into force.

EU adopts Forced Labor Regulation

On 19 November, the Council of the EU adopted a new regulation prohibiting products in the EU market made using forced labor. The European Commission will set up a new database listing products with a forced-labor risk, with new powers to initiate an investigation if suspected forced labor has been used. This is the last step in the decision-making procedure. (See EY Global Tax Alert, EU Council adopts trade, import and export ban on products made using forced labor, date 21 November 2024.)

After being signed by the President of the European Parliament and the President of the Council, the regulation will be published in the Official Journal of the European Union and will enter into force on the day following its publication. It will apply in 2027, three years after the date of entry into force.

Convention on pan-Euro-Mediterranean preferential rules of origin

Customs authorities from Switzerland and Germany have issued new guidance for companies using the Regional Convention on pan-Euro-Mediterranean (PEM Convention) preferential rules of origin.

Although revised rules of origin were due to be introduced from 1 January 2025, the revised rules required a number of legislative amendments by the respective parties to the PEM Convention that will not been completed in time for 1 January 2025. As a result, the parties have agreed that a parallel system will be in place for the calendar year of 2025 which includes that:

• Where appropriate, the revised PEM Convention will enter into force as planned on 1 January 2025 and replace the transitional rules.
• The rules of origin of the old PEM Convention will continue to be applied in parallel until 31 December 2025.

Exporters who apply the revised rules must mark the proof of origin accordingly with "REVISED RULES" until 31 December 2025 (in English, in box 7 of the movement certificate EUR.1 or at the end of the text of the origin declaration).

Additional announcements on this are expected in December 2024 with a meeting of the parties to the PEM Convention. Businesses using the rules of origin provided under the PEM Convention should understand any potential implications for their customs arrangements.

Agreement on Climate Change, Trade and Sustainability (ACCTS)

On 15 November 2024, Costa Rica, Iceland, New Zealand and Switzerland signed the ACCTS. The agreement is the first of its kind to contain legally binding commitments on trade and environmental issues, including:

• Tariff elimination: Tariffs are eliminated on 360 environmental goods, covering a range of products relating to environmental protection, renewable energy and the circular economy. The tariff cuts will be made available on a most-favored-nation basis and available to all WTO Members.
• Environmental services: The four parties included new commitments on 114 environmental services with the objective of boosting trade in environmental services.
• Fossil fuel subsidies: The ACCTS defines what constitutes a harmful fossil fuel subsidy and prohibits their use and the introduction of new measures.
• Voluntary ecolabelling: The ACCTS contains 13 nonbinding guidelines to strengthen the quality and comparability of voluntary ecolabels for goods and services.

The four members of the ACCTS must now ratify the agreement for it to enter into force. The agreement is open for other countries to join in due course.