A major new trade agreement between the European Union and the United States has been reached, averting a looming trade war but leaving European officials and industries divided amid concerns over its far-reaching implications.
New trade rules outlined
The deal, announced on Sunday and set to take effect from 1 August, establishes a baseline 15% tariff on most EU goods entering the US. This rate is a significant reduction from the 30% tariffs that US President Donald Trump had threatened to impose, but is still an increase compared to rates prior to his return to office. Key sectors affected include vehicles, pharmaceuticals, and semiconductors, which now face the new 15% levy, though some items such as aircraft and certain chemicals will be exempt for the time being.
The agreement follows months of tense negotiations and last-minute talks as the two economies—together accounting for nearly a third of global trade—sought to de-escalate escalating tariffs that threatened to disrupt industries on both sides of the Atlantic.
Energy and investment commitments
In exchange for the capped tariffs, the EU committed to purchasing $750 billion worth of American energy products annually through to 2027, as well as increasing investments within the United States by a further $600 billion. European officials describe this as an effort to enhance stability and predictability for business, particularly after a year marked by economic uncertainty and intensifying trade rhetoric.
Mixed reactions from both sides
French Prime Minister François Bayrou publicly condemned the arrangement, calling it “a dark day” for Europe, while other EU leaders, such as German Chancellor Friedrich Merz, said the agreement was necessary to avoid more damaging economic fallout. Most EU countries described the agreement as an imperfect but essential compromise.
President Trump hailed the deal as the biggest in history, claiming it would end what he characterised as unfair treatment of US exporters and strengthen ties with Europe.
Continued uncertainty for industries
Despite initial relief in financial markets, European businesses remain cautious. Leaders in the automotive and chemical industries noted that, while the 15% levy is less severe than what was feared, it still marks a sharp increase from the previous average tariff rate of 2.5%. Concerns also remain for sectors like steel and pharmaceuticals, where specific arrangements are yet to be clarified. For steel and aluminium, existing US tariffs of 50% will stay in place for now—with both parties agreeing to future negotiations on a quota system to regulate trade volumes.
Further details and the final product lists are expected to be released in a joint EU-US statement by 1 August. Officials on both continents have signalled that additional technical talks will take place in the coming weeks to resolve remaining issues.