The trade deal between the United States and the European Union is expected to have a significant impact on global trade. It will sharply reduce tariffs on American goods, giving a major boost to US exports across Europe.
What do we know about the deal?
According to a Bloomberg report, the average tariff the EU imposes on US goods will fall below 1% once the deal takes effect, making American products considerably more competitive in European markets. Major industrial sectors such as energy, automotive, technology and agriculture are expected to benefit the most from the pact.
The agreement, signed in Scotland last Sunday, was finalised after weeks of intense negotiations between US President Donald Trump and European Commission President Ursula von der Leyen. The EU has agreed to a 15% tariff on most of its exports to the US, a steep rate likely to impact European industries. In return, US tariffs on EU goods will drop to a baseline 5%, far lower than Trump’s earlier threat of 30%.
“This deal brings stability and predictability,” von der Leyen said. President Trump, calling it “the biggest of all the deals,” hailed the agreement as a landmark victory for American industry.
How did European leaders react to the trade deal?
The deal has provoked criticism within the EU, where many view it as heavily skewed in favour of the United States. Swedish MEP Karin Karlsbro warned that the agreement risks dismantling the principles of transatlantic free trade. French Prime Minister François Bayrou went further, calling it a “dark day for Europe” and accusing the bloc of bowing to US pressure.
Germany’s powerful auto industry is among the hardest hit. Car tariffs have been set at 15%, lower than the previously threatened 27.5%, but still well above pre-deal levels. Hildegard Müller, head of the German carmakers’ association (VDA), called the deal “fundamentally positive,” but admitted it could cost the industry billions annually.
As part of the agreement, the EU has pledged to purchase $750 billion in US energy products over three years, including oil, gas, nuclear fuel, and possibly semiconductors. Brussels has also announced $600 billion in investment in the US. However, EU officials later clarified that the figure reflects corporate intentions, not binding government commitments.
Analysts have questioned the realistic scope of such energy purchases, noting that the EU’s energy imports from the US totalled just $80 billion last year.
Winners and losers of trade deal
The United States stands to gain significantly from the new trade deal, with zero tariffs on many goods. The EU has pledged to purchase $750 billion in American energy products (including oil, gas, nuclear, fuel and chips) over a period of three years. The bloc also agreed to increase its investments in the US by over $600 billion from where its current investments stand. Apart from that, EU would also be buying American military equipment. According to the New York Times, of the $3.3 trillion American imports, the EU comprises nearly $610 billion. US manufacturers, particularly in the automobile sector, will benefit from lower tariffs on American vehicles entering the EU.
However, key sectors including pharmaceuticals, metals, wines, and spirits remain unresolved. The EU continues to seek exemptions or reduced tariffs for these products, but no formal agreement has been reached yet. “We have 15% for pharmaceuticals,” said the European Commission leader. “Whatever the decision later on is of the President of the US, how to deal with pharmaceuticals in general globally, that’s on a different sheet of paper.” She also added that the overall rate shouldn’t be “underestimated but it was the best we could get.”
Also, since the tariffs on steel and aluminum do not find a mention in the deal, the tariff on these metals stays at 50%.
Despite the sweeping headlines, the deal remains a non-binding framework. While the 15% baseline tariff on EU goods is still above the US President’s preferred minimum of 10% for some products, it is notably lower than his earlier proposals of 20%, 30%, and even the initial threat of 50%.
A joint declaration is expected by August 1, after which both sides will begin negotiating a legally binding text.