EU strike agreement on tariffs with Trump administration
The European Union (EU) and the United States have reached an agreement on a new trade pact, marking a significant step towards stabilizing transatlantic trade relations. The deal, which comes into effect from August 1, 2025, includes a 15% tariff on most EU exports to the US, a lower rate than the previously threatened 30%, but higher than the initially expected 10%.
The agreement, however, brings some relief to markets and the global economy as it removes a major risk of escalating tariffs. Despite European shipments to the US facing a higher tax at the border, the deal offers temporary zero tariffs for pharmaceutical exports and a quota system for steel and aluminum exports.
Under the quota system, volumes of steel and aluminum exports within the agreed limits will face reduced tariffs, while excess volumes will attract a 50% tariff. The detailed technical terms of this quota mechanism are yet to be finalized.
In addition to the tariff adjustments, the EU has committed to purchasing $750 billion worth of strategic energy products from the US over the remainder of the Trump administration. This includes oil, liquefied natural gas (LNG), and nuclear technology. The EU also aims to make substantial semiconductor purchases from the US, positioning the US as a preferred chip supplier.
The agreement also sees European companies planning to invest around $600 billion in the US within the period of Trump’s second term, although these investments depend on individual company decisions beyond the EU’s direct control.
Some agricultural products will be subject to a zero-for-zero tariff regime, excluding sensitive products like beef, rice, ethanol, sugar, and poultry. The deal also addresses non-tariff barriers in food and agricultural trade, with a focus on streamlining trade procedures, such as sanitary certificate processes for US pork and dairy.
The agreement on aerospace tariffs remains pending the outcome of a Section 232 probe. It is worth noting that the deal does not cover the EU's military equipment exports, which remain subject to separate negotiations.
The EU-US trade agreement represents a compromise between previously escalating tariff threats and attempts to stabilize transatlantic trade. However, there is some confusion and contrasting narratives from both sides regarding specific terms and quotas. Washington's talks continue with Switzerland, South Korea, and Taiwan, among other countries.
- The relief provided by the EU-US trade agreement to the global economy extends to finance, as it stabilizes transatlantic business relationships, potentially reducing economic uncertainty and improving financial markets' stability.
- In the realm of general news, the agreement's political implications go beyond tariffs, with the EU's commitment to purchase strategic energy products from the US and Europe's planned investment in US companies potentially shaping future business-political relations between the two regions.
