Zero Tariffs on the Horizon? France and the U.S. Signal Shift in Trade Talks

France’s recent discussions with the U.S. Treasury over a potential “zero reciprocal tariffs” deal by 2025 have sparked optimism in global markets, hinting at a thaw in transatlantic trade tensions. French Finance Minister Eric Lombard revealed that U.S. Treasury Secretary Scott Bessent responded positively to the idea, calling it “not out of reach.” The talks, if successful, could reshape cross-border commerce and offer a tailwind for sectors from automotive to luxury goods.

The Context: A Shift in Trade Dynamics

The proposal stems from ongoing EU-U.S. trade negotiations, where France has been a vocal advocate for reducing trade barriers. Lombard emphasized that Bessent’s openness reflects a softening of U.S. positions, which could mark a turning point after years of tariff disputes. While the EU has paused retaliatory tariffs against U.S. goods for 90 days—a temporary truce—the focus now is on a longer-term solution.

The idea of zero reciprocal tariffs would mean eliminating duties on imports and exports between France and the U.S., potentially boosting bilateral trade. In 2023, EU-U.S. trade totaled over €2.3 trillion, with automotive, machinery, and agricultural goods dominating exchanges. Tariffs on these items—such as the 25% U.S. duty on EU steel—have long been a sore spot, adding costs to manufacturers and consumers alike.

Market Implications: Betting on De-Escalation

The market has already priced in optimism. Since Lombard’s comments, the Stoxx Europe 600 index has risen 2.5%, while U.S. equities have climbed 1.8%, reflecting hopes for smoother trade relations.

For investors, the key question is: Which sectors stand to gain the most?

1. Automotive: Companies like Stellantis (STLA) and BMW (BMW.GR) could see reduced costs if tariffs on vehicles and parts are scrapped. U.S. rivals like Ford (F) might also benefit from smoother access to European markets.
   

2. Luxury Goods: Brands such as LVMH (MC.PA) and Kering (KER.PA) rely on transatlantic sales. Eliminating tariffs would cut costs for U.S. consumers buying European designer goods, potentially boosting demand.

3. Technology: Cross-border data flows and hardware exports—key for companies like Apple (AAPL) and SAP (SAP.GR)—could become less contentious without tariffs complicating supply chains.

Risks and Realities

While the talks are promising, hurdles remain. The U.S. Congress must approve any deal, and domestic industries like agriculture or steel may push back. Additionally, non-tariff barriers—such as regulatory differences—could persist.

However, the 90-day pause on EU retaliatory tariffs suggests both sides are serious about compromise. A 2023 study by the Peterson Institute found that eliminating tariffs between the EU and U.S. could boost annual trade by $180 billion. Even partial progress could reduce costs for multinational firms and ease inflationary pressures.

Conclusion: A New Era of Trade or Another False Dawn?

The zero-tariff proposal isn’t just about numbers—it’s a symbol of shifting priorities. Lombard’s optimism and Bessent’s openness reflect a broader recognition that trade wars hurt growth. If realized, this deal could unlock value for investors in sectors tied to transatlantic trade.

The data supports cautious optimism: EU-U.S. trade has grown at a 3.5% annual clip since 2010, but tariffs have cost businesses an estimated €20 billion annually. Eliminating those costs could supercharge that growth, rewarding investors who bet on companies positioned to benefit.

For now, markets are pricing in success. Investors should monitor the 90-day truce period closely—any extension or escalation will signal whether this is a real pivot or a fleeting hope.

In the words of Lombard: “Getting back to zero tariffs isn’t just an economic win—it’s a statement of intent.” For investors, that intent could translate into tangible returns.