Deal with a bad aftertaste: EU and US agree on trade agreement

The EU and the United States agreed on a long-awaited trade deal on Sunday, averting the introduction of a comprehensive 30 percent US tariff from August.

The agreement was announced after a face-to-face meeting between Commission President Ursula von der Leyen and US President Donald Trump in Scotland. It provides for a uniform US tariff of 15 percent on "cars and everything else," as Trump explained.

Brussels also pledged to import $750 billion worth of US energy and invest an additional $600 billion in the US market – “beyond what has already been committed,” Trump said.

He also announced that the EU would buy “large quantities of [American] military equipment” and open its markets to US exports with “zero tariffs.”

Von der Leyen, who appeared before the press alongside Trump, described the "huge" agreement as a step that would bring "stability and predictability" to companies "on both sides of the Atlantic."

"These are blanket 15 percent tariffs, all inclusive," said von der Leyen, who, as Commission President, is also responsible for EU trade policy. "In fact, this essentially opens up the European market."

The agreement marks the end of months of increasingly frantic efforts by European leaders to avert the across-the-board tariff increases threatened by Trump – measures that have shaken global supply chains and exacerbated Europe's economic weakness.

Trump had previously imposed tariffs of 50 percent on steel and aluminum, 25 percent on cars and car parts, and a flat rate of 10 percent on most other EU goods. This would affect exports worth around €370 billion, or about 70 percent of all EU exports to the US.

These duties come on top of the average 4.8 percent that EU exporters already had to pay before Trump returned to the White House in January.

At the beginning of the month, Trump also threatened a " reciprocity tariff " of 30 percent starting August 1. The self-proclaimed "Tariff Man" also announced further sectoral tariffs on products such as pharmaceuticals, semiconductors, and aircraft.

After the meeting, von der Leyen told journalists that the so-called "framework agreement" stipulates that pharmaceuticals and semiconductors would also be subject to the 15 percent tariff. EU steel and aluminum exports, in turn, would be subject to a quota model, with a limited portion below the 50 percent threshold being subject to tariffs.

The EU and the US will also completely waive mutual tariffs on aircraft, semiconductor equipment, critical raw materials, and "certain" chemicals, generics, and agricultural products, von der Leyen added. Brussels is working to add more products to this list.

Even before the meeting, Trump had explicitly ruled out that pharmaceutical products would be part of the agreement: “Pharmaceuticals are not part of it because we want them to be made in the USA,” he said at the time.

The USA is the EU's most important export market for pharmaceuticals: in 2023, pharmaceutical and medical products worth 120 billion euros were shipped across the Atlantic.

The agreement was largely welcomed by EU governments and business associations.

“With the agreement in the EU-US negotiations on tariffs, we have succeeded in averting a trade conflict that would have hit the export-oriented German economy hard,” said Chancellor Friedrich Merz.

Fredrik Persson, president of the Brussels-based trade association BusinessEurope , said the deal prevented an “escalation of tariffs that would have been extremely damaging to businesses and consumers on both sides of the Atlantic.”

“We still need to examine the details carefully and hope for early solutions for important sectors that do not appear to be part of the agreement,” he added.

According to two EU diplomats, Brussels is expected to suspend its €93 billion retaliatory list against US products. The measures, which member states agreed on last week, were originally scheduled to come into force on August 7.

EU ambassadors plan to meet for a special session on Tuesday morning to discuss the agreement.