US Trade Policy Watch: Section 301, EU Relations and Aerospace Actions

President Trump threatens to halt trade with Spain amid NATO dispute

US President Donald Trump escalated his criticism of Spain last Wednesday, suggesting that the United States should end trade relations with Madrid over its defence spending stance. The comments stem from a long-running dispute over Spain’s refusal to support NATO’s target of increasing defence spending to 5% of GDP by 2035. 

Speaking to reporters before meeting NATO leaders, Trump said: “I didn't speak to Spain. Spain is a wasted cause. We don't want to do any trade business with Spain anymore.” He also appeared to address Treasury Secretary Scott Bessent directly, adding: “By the way, I'd like you to cut it off.”  

However, any attempt to restrict trade with Spain would face practical challenges, as Spain is part of the European Union, which has sole competence over trade policy for its member states. 

The potential implications for the EU/US trade agreement remain uncertain.

Irish Reaction

Tánaiste Simon Harris has warned that any US attempt to target Spain in an ongoing trade dispute could have wider implications for EU/US trade relations, stressing that trade agreements apply equally across all EU member states. 

Speaking at a National Treasury Management Agency briefing, Harris noted that the European Union and the United States have invested significant effort in negotiating a tariffs agreement and emphasised the importance of respecting its terms, stating: 

“Trade agreements are for all member states. There’s been a huge amount of work done in good faith by the European Union to reach a trade agreement with the United States around tariffs and the likes. It’s very important that both sides honour that agreement in full.”

Global Tariffs: Section 122 Nears Expiry, Section 301 Next in Line?

The current 10% global tariffs imposed under Section 122 were introduced on 24 February 2026 following the removal of the IEEPA tariff measures and are scheduled to expire on 24 July 2026, unless Congress agrees to extend them. 

Attention is now turning to the outcome of the USTR's Section 301 investigations into excess supply and forced labour practices. On 2 June 2026, USTR proposed additional tariffs of 10% on imports from the EU, UK and 14 other economies, and 12.5% on imports from a further 44 economies. 

While no final decision has yet been announced, there is growing expectation that any Section 301 measures could replace the Section 122 tariffs following their expiry. For EU and UK exporters, the proposed 10% Section 301 tariff would broadly maintain the current tariff position established under Section 122, limiting the immediate impact of such a transition. 

Importantly, the proposed Section 301 measures would continue to exclude a number of key sectors, including civil aircraft, aircraft engines and parts, pharmaceuticals, Section 232 products, and USMCA-compliant Canadian and Mexican goods.

European Parliament Approves EU/US Trade Deal with Stronger Safeguards

The European Parliament has approved legislation implementing the EU/US trade agreement, including the elimination of tariffs on virtually all US-origin industrial goods and enhanced market access for a range of US agricultural and seafood products.  

The final legislation incorporates several amendments negotiated by Parliament and the Council to strengthen the Commission’s original proposal. These include a sunset clause, under which the agreement will expire on 31 December 2029 unless renewed, following a review of its economic impact on EU industry, agriculture and SMEs. 

Parliament also secured additional protections linked to ongoing US steel and aluminium tariffs. The Commission will be able to suspend tariff preferences if the US continues to apply tariffs above 15% on EU steel and aluminium derivative products beyond the end of 2026 or fails to address wider EU concerns regarding tariff treatment of certain exports.

USMCA Talks Continue Beyond 1 July Review Deadline

The United States, Canada and Mexico have failed to meet the 1 July deadline to conclude the six-year review of the United States-Mexico-Canada Agreement (USMCA), the free trade agreement governing trade across North America. Despite the missed deadline, the agreement remains in force while discussions continue between the three countries. 

The review process is intended to determine whether the USMCA should remain in place through to its scheduled expiry in 2036. While all three governments have indicated support for maintaining the agreement, negotiations are expected to focus on a range of issues including manufacturing, automotive supply chains and broader trade policy priorities. 

The delay creates some uncertainty for businesses operating across North America, although no immediate changes to tariff treatment or market access rules have been announced. Companies with integrated US, Canadian and Mexican supply chains should continue to monitor developments as negotiations progress. 

US Launches Aerospace Trade Talks Following Section 232 Findings

On 9 July, President Trump issued a proclamation following the completion of a Section 232 investigation into imports of commercial aircraft, jet engines, and related parts. The investigation concluded that such imports threaten to impair US national security, citing the strategic importance of the aerospace sector to defence, transportation, cargo operations, and the broader US economy. 

Despite the findings, the Administration has not imposed new tariffs at this stage. Instead, the US Department of Commerce and the Office of the US Trade Representative have been instructed to negotiate agreements with trading partners to address the identified concerns and support the health of the domestic aerospace industry. The proclamation provides a 180-day period for negotiations, after which the President may consider additional measures if agreements are not reached or prove ineffective. 

The White House stated that the US aerospace industry faces challenges including increased reliance on foreign supply chains, reduced domestic manufacturing capacity, skilled labour shortages, and growing production costs. However, the decision not to impose immediate tariffs is likely to provide short-term certainty for aircraft manufacturers, airlines, engine producers, maintenance providers, and aerospace supply chains that rely on international sourcing. 

While commercial aircraft, jet engines and aircraft parts avoid new Section 232 tariffs for now, the sector remains under review and future trade measures remain possible if negotiations fail to address US national security concerns.

EU Extends Suspension of US Aircraft Dispute Tariffs

The European Commission has adopted Regulation (EU) 2026/1549, extending the suspension of additional tariffs on certain US-origin goods that were originally imposed as part of the long-running WTO Airbus-Boeing dispute. The suspension will continue from 11 July 2026, preserving the tariff-free treatment that has been in place since 2021 and supporting stability in transatlantic trade relations. 

The Commission noted that the underlying circumstances of the dispute remain unchanged and that the United States has not reimposed retaliatory measures against EU exports. As a result, the EU will continue to suspend its countermeasures while monitoring developments in EU/US trade relations and retaining the ability to review its position if circumstances change. For the aviation sector, this provides continued certainty, particularly as aircraft engines were not included in the EU’s original retaliatory tariff measures.

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