US President Donald Trump and European Commission President Ursula von der Leyen have unveiled a broad trade agreement that sets 15% tariffs on most European imports. This averts Trump’s earlier warning of a 30% rate if a deal isn’t struck by 1 August.
These tariffs, import taxes applied to European goods bought by Americans, could raise prices for US consumers and reduce profits for European businesses and their US partners.
Here are some things to know about the trade deal between the United States and the European Union:
What’s in the agreement?
Trump and von der Leyen’s announcement, made during Trump’s visit to one of his golf courses in Scotland, leaves many details to be filled in. The headline figure is a 15% tariff rate on “the vast majority” of European goods brought into the US, including cars, computer chips and pharmaceuticals. it’s lower than the 20% Trump initially proposed, and lower than his threats of 50% and then 30%.
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Von der Leyen said the two sides agreed on zero tariffs on both sides for a range of “strategic” goods-Aircraft and aircraft parts, certain chemicals, semiconductor equipment, certain agricultural products, and some natural resources and critical raw materials. Specifics were lacking.
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She said the two sides “would keep working” to add more products to the list.
Additionally, the EU side would purchase what Trump said was USD 750 billion worth of natural gas, oil and nuclear fuel to replace Russian energy supplies, and Europeans would invest an additional USD 600 billion in the US.
What’s not in the deal?
Trump said the 50% US tariff on imported steel would remain; von der Leyen said the two sides agreed to further negotiations to fight a global steel glut, reduce tariffs and establish import quotas, that is, set amounts that can be imported, often at a lower rate.
Trump said pharmaceuticals were not included in the deal. Von der Leyen said the pharmaceuticals issue was “on a separate sheet of paper” from Sunday’s deal.
Where the USD 600 billion for additional investment would come from was not specified. And von der Leyen said that when it came to farm products, the EU side made clear that “there were tariffs that could not be lowered,” without specifying which products.
What’s the impact?
The 15% rate removes Trump’s threat of a 30% tariff. It’s still much higher than the average tariff before Trump came into office, of around 1%, and higher than Trump’s minimum 10% baseline tariff.
Higher tariffs, or import taxes, on European goods mean sellers in the U.S. would have to either increase prices for consumers, risking loss of market share or swallow the added cost in terms of lower profits. The higher tariffs are expected to hurt export earnings for European firms and slow the economy.
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The 10% baseline applied while the deal was negotiated was already sufficiently high to make the European Union’s executive commission cut its growth forecast for this year from 1.3% to 0.9%.
Von der Leyen said the 15% rate was “the best we could do” and credited the deal with maintaining access to the US market and providing “stability and predictability for companies on both sides.”
What are some of the reactions to the deal?
German Chancellor Friedrich Merz welcomed the deal, which avoided “an unnecessary escalation in transatlantic trade relations” and said that “we were able to preserve our core interests,” while adding that “I would have very much wished for further relief in transatlantic trade.”
The Federation of German Industries was blunter. “Even a 15% tariff rate will have immense negative effects on export-oriented German industry,” said Wolfgang Niedermark, a member of the federation’s leadership.
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While the rate is lower than threatened, “the big caveat to today’s deal is that there is nothing on paper, yet,” said Carsten Brzeski, global chief of macro at ING bank.
“With this disclaimer in mind and at face value, today’s agreement would clearly bring an end to the uncertainty of recent months. An escalation of the US-EU trade tensions would have been a severe risk for the global economy,” Brzeski said.
“This risk seems to have been avoided.”
What about car companies?
When asked whether European carmakers could still compete under the new 15% tariff, von der Leyen noted that the rate is significantly lower than the previous 27.5% which included Trump’s 25% tariff on foreign cars, along with the existing 2.5% U.S. car import duty.
The effect on some companies is expected to be considerable. Automaker Volkswagen, for instance, reported a $1.5 billion loss in profit during the first half of the year due to the higher tariffs.
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Mercedes-Benz dealers in the US have said they are holding the line on 2025 model year prices “until further notice.” The German automaker has a partial tariff shield because it makes 35% of the Mercedes-Benz vehicles sold in the U.S. in Tuscaloosa, Alabama, but the company said it expects prices to undergo “significant increases” in the coming years.
What were the issues dividing the two sides?
Before Trump returned to office, the US and the EU maintained relatively low tariff rates within the world’s largest bilateral trading relationship, totalling around $2 trillion annually. Combined, the U.S. and EU account for 44% of the global economy. According to the Brussels-based Bruegel think tank, the average U.S. tariff on European goods was 1.47%, while the EU’s average tariff on American products stood at 1.35%.
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Trump has complained about the EU’s 198 billion-euro trade surplus in goods, which shows Americans buy more from European businesses than the other way around, and has said the European market is not open enough for US-made cars.
Von der Leyen said the 15% rate was ‘the best we could do’ and credited the deal with maintaining access to the US market.
Even a 15% tariff rate will have immense negative effects on export-oriented German industry.
However, American companies fill some of the trade gap by outselling the EU when it comes to services such as cloud computing, travel bookings, and legal and financial services. And some 30% of European imports are from American-owned companies, according to the European Central Bank.