The United States and the European Union announced on Sunday a broad framework for a new trade agreement aimed at defusing tensions between the two economic giants and preventing what could have become a damaging transatlantic trade war.
The deal imposes a uniform 15% tariff on most goods exported from the EU to the United States, including automobiles and pharmaceuticals.
Though the rate is higher than the 10% cap the European bloc had hoped for, it is significantly lower than the 30% tariffs that President Donald Trump had previously threatened.
Flanked by Ursula von der Leyen, President of the European Commission, Trump said the agreement would usher in a new era of “balanced, tough, and fair trade” between the two long-standing allies.
“We made it,” he said, calling the outcome “the biggest of all the deals.”
EU to purchase $750 bn worth of American energy, increase investment in the US
Central to the agreement are substantial pledges from the European Union on energy and investment.
Von der Leyen confirmed that the bloc would purchase $750 billion worth of American energy over the next three years.
Trump also announced that EU member states had agreed to increase their total investment in the US economy by over $600 billion.
This investment, officials said, would span key industries, including automotive manufacturing, pharmaceuticals, and defense.
The EU has also committed to purchasing an unspecified amount of American military equipment.
“It’s a good deal, it’s a huge deal,” von der Leyen said, calling the negotiations “tough” but ultimately fruitful.
Some relief was offered on select goods.
Both sides agreed to reduce tariffs to zero on aircraft, aircraft parts, some agricultural products, semiconductor equipment, generic medicines, and certain chemicals—signaling a degree of cooperation that had been lacking in recent years.
Steel and pharmaceuticals excluded from the deal
Despite these developments, not all sectors emerged unscathed.
One conspicuous exclusion from the deal is the steep 50% tariff the Trump administration had earlier imposed globally on steel and aluminum imports.
While von der Leyen hinted that these may be addressed in follow-up negotiations, no immediate relief was offered.
Pharmaceuticals—Europe’s most significant export category to the United States—also remain outside the current agreement and will still be subject to a 15% tariff.
Von der Leyen acknowledged that the pharmaceutical issue had been “placed on a separate sheet of paper,” indicating that further negotiations are expected.
A senior U.S. official clarified that pharmaceutical and semiconductor exports from Europe would continue to face the 15% tariff rate regardless of potential global tariff policies under review by the Trump administration.
Those measures, which could be announced in the coming weeks, are part of a broader strategy to recalibrate US trade policy across critical supply chains.
Mixed reactions from Europe highlight unease
Reactions across the European continent were mixed. German Chancellor Friedrich Merz welcomed the accord, praising it as a means of avoiding “an unnecessary escalation in transatlantic trade relations.”
He noted, however, that deeper tariff reductions would have been preferable.
“We were able to preserve our core interests,” Merz said, while expressing disappointment over the limited scope of concessions.
Business groups were more critical. Wolfgang Niedermark of the Federation of German Industries warned that even the 15% rate would have “immense negative effects” on Germany’s export-driven manufacturing sector.
In France, concerns were more pointed.
“The agreement negotiated by the European Commission with the United States will bring temporary stability to economic actors threatened by the escalation of American tariffs, but it is unbalanced,” said French European Affairs Minister Benjamin Haddad on X, the social media platform formerly known as Twitter.
Industry Minister Marc Ferracci echoed the sentiment, adding that more detailed discussions—potentially stretching over weeks or even months—would be needed before a binding legal agreement could be finalized.
A temporary shield against global economic volatility
Though the announced deal appears to stave off immediate retaliation and avoids an all-out tariff war, trade experts cautioned against celebrating too early.
Mujtaba Rahman of the Eurasia Group noted that several critical areas remain ambiguous.
“If there aren’t further exemptions to be negotiated to that 15%, I think it’s a far more suboptimal deal than the member states were hoping to achieve,” he said.
The agreement does mirror recent trade pacts with other US partners.
The 15% rate is identical to what was agreed upon with Japan last week and is more favourable than the 19 to 20% tariffs recently slapped on Southeast Asian nations.
However, it remains higher than the 10% rate applied to the UK.
Carsten Brzeski, global head of macroeconomics at ING, offered cautious optimism.
“At face value, today’s agreement would clearly bring an end to the uncertainty of recent months,” he said.
“An escalation of the U.S.-EU trade tensions would have been a severe risk for the global economy. This risk seems to have been avoided.”
For now, though, leaders on both sides were keen to signal progress.
“This deal enables trade, it rebalances our relationship,” von der Leyen said. Whether it holds under pressure remains to be seen.
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