Had the EU and US failed to reach an agreement, tariffs would have gone to 30% on August 1.
As global trading partners are concerned, the European Union is collectively the US’ largest trading partner. That point came into sharp focus Sunday, as President Donald Trump announced a trade agreement with the bloc that would levy a 15% tariff rate on most goods — a similar rate to what the US recently imposed on Japan as part of their negotiation.
That rate is effectively half of what Trump threatened to level on the EU had the parties failed to reach an agreement by August 1. The deal’s announcement came as he met with European Commission President Ursula von der Leyen in Scotland over the weekend.
“I think it’s the biggest deal ever made”, Trump said of the development with the EU and echoing sentiments made while announcing a trade deal with the Japanese government about a week ago. On the European side, von der Leyen noted the market’s importance, with a collective population of 800 million people. She said the deal will bring “stability and predictability” to the relationship between two of the world’s largest economies.
European automakers have been grappling with 25% automotive tariffs since April, so this agreement may positively impact prices on vehicles automakers like Audi, BMW, Mercedes-Benz and Volkswagen import to the US from the EU. The 15% duty on most other goods, however, represents a tripling of the 4.8% rate currently in force. According to a senior US officials, there will be a carve-out on tariffs for certain European exports like aircraft components, chemicals, semiconductor equipment and some agricultural products.
In exchange for lower tariffs against the punitive rates Trump threatened to implement August 1, the EU said European companies would import $750 billion of energy-related goods and services over the next three years, and invest a further $600 billion in the US.
At the moment, von der Leyan described what was announced as a “framework”, as certain details would be hammered out over the coming weeks. Part of that process also involves approval from EU member states — some of whom, including France, are pushing back against the terms laid out over the weekend.
Practically speaking, we will still have to wait and see over the coming months how these tariffs impact pricing on goods (and especially cars). Economists and market analysts are largely in a “wait and see” period, where we’ll see if tariff-related price increases contribute to inflation data in the remaining quarters of 2025 and beyond.
