U.S. and European Union Reach Trade Agreement: 15% Tariff Imposed on Most EU Cars and Other Exports to U.S.

According to foreign media reports, the United States and the European Union reached a framework agreement on July 27, under which most goods exported from the EU to the US will face a 15% tariff. This move successfully avoided a trade war that could have dealt a heavy blow to the global economy. It is reported that the trade volume between the US and the EU accounts for nearly one-third of global trade.

Image source: European Union

On July 27, after meeting with European Commission President Ursula von der Leyen, Trump announced that a 15% baseline tariff would apply to almost all EU goods exported to the United States, including automobiles. It is noteworthy that 15% is the maximum rate and will not be added on top of any existing tariffs.

Ursula von der Leyen stated that the scope of the tariffs covers all goods, although Trump later said that pharmaceuticals and metals were excluded. This brings an end to months of tense negotiations between the EU and the United States. Ursula von der Leyen emphasized that the US and the EU have reached a major trade agreement between the world’s two largest economies, which will bring stability and predictability.

At the same time, the U.S. tariffs on EU steel and aluminum will remain at 50%; however, Ursula von der Leyen stated that these tariffs will be gradually reduced in the future and replaced with a quota system. Ursula von der Leyen also pointed out that although the U.S. and EU have signed a framework agreement, the U.S. will announce the results of the Section 232 trade investigations on semiconductors and pharmaceuticals within two weeks and will independently decide the tariff rates for these two categories of goods. However, she emphasized that any future U.S. tariff decisions in the chip and pharmaceutical sectors will be independent of the current agreement.

Additionally, according to the trade agreement reached between the U.S. and the EU, the EU has committed to purchasing $250 billion worth of American energy (including liquefied natural gas (LNG), oil, and nuclear fuel) annually for three years, totaling $750 billion, to replace Russian gas supplies. The EU will also add $600 billion in investments in the U.S. on top of existing investments, fully open the markets of all member states to the U.S. by implementing zero tariffs on industrial goods, and make large-scale purchases of American military equipment.

The above statement was released less than a week before the August 1st deadline when U.S. President Trump threatened to impose high tariffs on EU goods. Trump's core concern lies in the U.S. trade deficit with the EU. According to data from the U.S. Census Bureau, this trade deficit reached $235 billion in 2024. In response, the EU pointed out that the U.S. has a trade surplus in services with the EU, which has somewhat balanced the transatlantic trade relationship. In May this year, Trump threatened to impose a 50% tariff on almost all EU goods as a means to pressure the EU and accelerate the negotiation process; later, the U.S. side reduced this tariff rate to 30%.

Although the 15% tariff rate is better than the previously threatened 30% punitive rate from the United States, for many Europeans, this outcome still falls far short of the EU’s initial goal of a zero-for-zero tariff agreement.

However, both the US and the EU will implement zero-for-zero tariffs (i.e., mutual exemption of tariffs) on the following goods: all aircraft and their parts; certain chemicals; certain generic pharmaceuticals and semiconductor manufacturing equipment; certain agricultural products, natural resources, and critical raw materials. More products will be added to this list. Tariffs on spirits remain to be determined.

Trump is seeking to reshape the global economic order and reduce the trade deficit that the U.S. has had for decades. Although the Trump administration failed to fulfill the promise of "90 deals in 90 days," it has reached trade agreements with the UK, Japan, Indonesia, and Vietnam. On July 27, Trump also claimed that tariffs are bringing hundreds of billions of dollars in revenue to the United States.