US and EU Settle on 15% Tariffs, Avoid Transatlantic Trade War

The United States and the European Union have reached a comprehensive trade agreement, successfully averting a full-scale transatlantic trade war just days before a looming August 1 deadline, when the U.S. was set to impose steep tariffs on EU imports. The breakthrough came following a private meeting in Scotland between U.S. President Donald Trump and European Commission President Ursula von der Leyen. As part of the agreement, a 15% tariff will be imposed on most European goods, significantly less than the initially planned 30%.

President Trump hailed the agreement as the “biggest deal ever made,” expressing optimism about its benefits for both parties. Von der Leyen echoed this sentiment, saying the deal would bring much-needed stability and predictability to transatlantic trade, which is vital for businesses on both sides.

This agreement marks one of the most consequential trade deals of Trump’s presidency, coming after earlier trade arrangements with countries such as Japan, the United Kingdom, Indonesia, Vietnam, and the Philippines, as well as a temporary truce with China. The EU remains the U.S.’s largest trading partner, with bilateral trade in goods and services nearing $2 trillion in the previous year.

Under the new deal, the 15% tariff applies broadly to European exports, including automobiles. This represents a significant relief for Europe’s automobile industry, which had previously been subject to a 25% duty on top of an existing 2.5% levy since April. Some goods, including aircraft parts, semiconductor equipment, specific chemicals, and agricultural products, will be fully exempt from the tariffs.

Additionally, Trump announced that the EU has committed to purchasing approximately $750 billion worth of U.S. energy and increasing its total investment in the U.S. by $600 billion. The EU has also placed a substantial order for American military equipment. Trump emphasized the significance of these measures by stating, “We have the opening up of all of the European countries.”

Despite the positive announcement, few specific details were released, and the agreement has not yet been formalized in writing. Carsten Brzeski, Global Head of Macro at ING Research, cautioned that more clarity is needed in the coming days to fully evaluate the deal’s impact.

The agreement came after months of tense exchanges, with Trump repeatedly accusing the EU of unfair trade practices. Just before the latest negotiations began, Trump described existing trade terms as “very one-sided” and “very unfair to the United States.” Tensions nearly derailed the talks earlier in the month when Trump threatened to move forward with a 30% tariff unless the EU accepted the 15% rate recently agreed upon with Japan. Brussels had prepared a long list of retaliatory tariffs on goods ranging from beef and beer to Boeing aircraft.

German Chancellor Friedrich Merz welcomed the deal, noting that it had prevented a potentially damaging conflict for Germany’s export-driven economy, particularly its auto sector. Italian Prime Minister Giorgia Meloni called the deal “positive” but noted that a thorough review of the terms was necessary. However, not all European lawmakers were supportive—Danish MP Rasmus Jarlov criticized the deal, arguing that it would raise prices in both regions and harm the global economy.

Trump is currently in Europe and is scheduled to meet UK Prime Minister Keir Starmer to further discuss trade matters before returning to the U.S.