America and the European Union have reached a wide-ranging trade agreement, ending a months-long standoff and averting a full-blown commerce warfare simply days earlier than President Donald Trump’s deadline to impose steep tariffs.
The EU can pay 15 p.c tariffs on most items, together with automobiles. The tariff price is half the 30 p.c Trump had threatened to implement beginning on Friday. Brussels additionally agreed on Sunday to spend tons of of billions of {dollars} on US weaponry and power merchandise on high of present expenditures.
Chatting with reporters at his Turnberry golf resort in Scotland, Trump hailed the settlement because the “largest deal ever made”. “I feel it’s going to be nice for each events. It’s going to carry us nearer collectively,” he added.
European Fee President Ursula von der Leyen mentioned the settlement would “carry stability” and “carry predictability that’s crucial for our companies on each side of the Atlantic”.
Von der Leyen defended the deal, saying the intention was to rebalance a commerce surplus with the US. Trump has made no secret of utilizing tariffs to attempt to trim US commerce deficits.
Sunday’s settlement capped off months of often tense shuttle diplomacy between Brussels and Washington though neither aspect disclosed the total particulars of the pact or launched any written supplies.
It follows preliminary commerce pacts the US signed with Japan, the United Kingdom, Indonesia, Vietnam and the Philippines and a 90-day commerce truce with China.
So how will the deal affect the 2 sides, which account for nearly a 3rd of worldwide commerce, and can it finish the threats of a tariff warfare?
What was agreed?
At a information occasion at Trump’s golf resort, von der Leyen mentioned a 15 p.c tariff would apply to European automobiles, prescription drugs and semiconductors – all essential merchandise for Europe’s economic system.
For his half, Trump mentioned US levies on metal and aluminium, which he has set at 50 p.c on many international locations, wouldn’t be minimize for EU merchandise, dashing the hopes of business within the bloc. Elsewhere, aerospace tariffs will stay at zero for now.
In change for the 15 p.c tariff price on EU items, Trump mentioned the bloc could be “opening up their international locations at zero tariff” for American exports.
As well as, he mentioned the EU would spend an additional $750bn on US power merchandise, make investments $600bn within the US and purchase navy gear price “tons of of billions of {dollars}”.
Von der Leyen confirmed that the EU would search to purchase an additional $250bn of US power merchandise annually from now till 2027.
“With this deal, we’re securing entry to our largest export market,” she mentioned.
On the identical time, she acknowledged that the 15 p.c tariffs could be “a problem for some” European industries.
The EU is the US’s largest buying and selling companion with two-way commerce in items and providers final yr reaching almost $2 trillion.
How have European leaders responded?
German Chancellor Friedrich Merz welcomed the settlement, saying it avoids “an pointless escalation in transatlantic commerce relations”.
He mentioned a commerce warfare “would have hit Germany’s export-oriented economic system onerous”, stating that the German automobile business would see US tariffs lowered from 27.5 p.c to fifteen p.c.
However French Prime Minister Francois Bayrou known as the deal a “darkish day” for Europe, saying the bloc had caved in to the US president with an unbalanced deal that spares US imports from any speedy European retaliation.
“It’s a darkish day when an alliance of free peoples, introduced collectively to affirm their widespread values and to defend their widespread pursuits, resigns itself to submission,” Bayrou wrote on X of what he known as the “von der Leyen-Trump deal”.
Wolfgang Niedermark, a board member of the Federation of German Industries commerce physique, known as the deal “an insufficient compromise” with the EU “accepting painful tariffs”.
A 15 p.c tariff price “could have an enormous unfavourable affect on Germany’s export-oriented business”, he mentioned.
Earlier, Benjamin Haddad, France’s European affairs minister, mentioned: “The commerce settlement … will carry momentary stability to financial actors threatened by the escalation of American tariffs, however it’s unbalanced.”
Echoing that sentiment, Dutch International Commerce Minister Hanneke Boerma mentioned the deal was “not supreme” and known as on the fee to proceed negotiations with Washington.
The European Fee is chargeable for negotiating commerce offers for your complete bloc.
EU ambassadors will probably be discussing the settlement with the fee this week.
How was commerce carried out earlier than the deal?
On July 12, Trump threatened to impose 30 percent tariffs on EU items if the 2 sides couldn’t attain a deal earlier than this Friday, the day a suspension expires on the implementation of what Trump calls his “reciprocal tariffs”, which he positioned on almost all international locations on this planet.
These “reciprocal tariffs” are resulting from come into impact along with the 25 percent tariffs on automobiles and automobile elements and the 50 percent levy on metal and aluminium merchandise Trump already put in place.
On the European aspect, it’s understood that Brussels would have pushed forward with a retaliatory tariffs package deal on 90 billion euros ($109bn) of US items, together with automobile elements and bourbon, if talks had damaged down.
The EU had been a frequent goal of escalating commerce rhetoric by Trump, who accused the bloc of “ripping off” the US.
In 2024, the US ran a $235.6bn items deficit with the EU. Prescription drugs, automobile elements and industrial chemical compounds have been amongst Europe’s largest exports to the US, based on EU knowledge.
How will the deal affect the US and EU?
Bloomberg Economics estimated {that a} no-deal consequence would have raised the efficient US tariff price on European items to just about 18 p.c on Friday.
The brand new deal brings that quantity right down to 16 p.c, providing a small reprieve to European exporting companies. Nonetheless, present commerce limitations are a lot larger than earlier than Trump took workplace in 2025.
In line with Bruegel, a analysis group, the common US tariff price on EU exports was simply 1.5 p.c on the finish of 2024.
William Lee, chief economist on the Milken Institute, informed Al Jazeera: “I feel the [Trump] technique has been clear from the very starting. … It’s brinkmanship. … Both companion with the US or face excessive tariffs.”
In the meantime, US Commerce Secretary Howard Lutnick mentioned: “President Trump simply unlocked one of many largest economies on this planet. The European Union goes to open its $20 trillion market and utterly settle for our auto and industrial requirements for the primary time ever.”
