Key takeaways

• The European Union (EU) and the US reached a trade deal on 27 July, agreeing on a 15% tariff rate to be imposed on EU goods sold to the US, starting 1 August. However, details of sectoral tariffs, namely pharmaceuticals and semiconductors may not be fully clear.
• Other key terms of the deal include a USD750 billion purchase of US energy products and chips and USD600 billion of additional US investments from the EU. Although the Eurozone is ultimately left with a higher baseline tariff of 15% compared to the 10% level it was hoping to achieve, the incremental downside risks to growth should be manageable given that “certainty” may pave the way for stabilisation in sentiment or a bottoming out in tariff-exposed sectors.
• We keep our neutral view on Europe ex-UK equities with a preference for Industrials, Financials and Utilities. Our preferred exposure in the fixed income space lies with investment grade bonds of 7-10- year duration.

Please refer to the full report for details about the event and our investment view.

https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/eu-us-deal-eases-near-term-downside-risks/