Trump's EU Trade Deal Explained

Newsweek

3 days ago

Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources.
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After months of negotiations, and the two sides exchanging threats of further tariffs and potential countermeasures, the European Union and the United States have finalized terms of a deal that offers the bloc a reduced tariff rate in return for billions of dollars' worth of purchases and investments.
"I think it's the biggest deal ever made," President Donald Trump said following a meeting with European Commission President Ursula von der Leyen on Sunday afternoon.
Why It Matters
As well as averting a prolonged standoff and the risk of an all-out trans-Atlantic trade war, the deal substantially reduces the potential barriers that were emerging in the world's largest bilateral trading relationship—valued at just under $1 trillion last year per the U.S. Trade Representative.
The announcement, which follows weeks of back-and-forth and periodic reports of stalled negotiations, also marks a major victory for the administration, which has been racing to finalize as many deals as possible ahead of the latest, August 1 deadline.
Former Commerce Secretary Wilbur Ross told Newsweek recently that this could have proved one of the hardest deals to finalize, given that 27 members make up the EU, with the resulting difficulty of the bloc forming a unified front on complex issues such as trade.
What Are the Terms of the New Deal?
After pivotal in-person negotiations between Trump and von der Leyen, the president read out the terms of the new deal at the his luxury golf course in Turnberry, Scotland.
He said that the EU has agreed to purchase $750-billion-worth of U.S. energy products, including oil, gas, nuclear fuel and semiconductors. In a press release, von der Leyen said that this will "diversify our sources of supply and contribute to Europe's energy security."
In addition, the deal calls for a $600-billion investment in the U.S. by the EU, which comprises purchases of American military equipment.
In exchange, the U.S. will lower the import tax on the vast majority of European products to 15 percent, half the rate that was set to go into effect on August 1, and far below the 50-percent rate Trump briefly threatened in May.
President Donald Trump, right, shakes hands with European Commission President Ursula von der Leyen as they meet in Turnberry, Scotland, on Sunday, July 27, 2025.
President Donald Trump, right, shakes hands with European Commission President Ursula von der Leyen as they meet in Turnberry, Scotland, on Sunday, July 27, 2025.
Jacquelyn Martin/AP Photo
The outcome is less favorable than the 10-percent rate negotiated by the United Kingdom, but matches that secured by Japan last week.
"This rate applies across most sectors, including cars, semiconductors and pharmaceuticals," said von der Leyen. "This 15 percent is a clear ceiling. No stacking. All-inclusive."
Trump said that the lower tariff rate will come with the condition of the EU "opening up their countries" to more American exports.
The pair have also agreed on "zero-for-zero" tariffs on several goods, including aircraft and component parts, certain chemicals and agricultural products, and critical raw materials. The EU chief said that the bloc will "keep working to add more products to this list."
However, Trump said that the 50-percent tariffs on steel and aluminum will remain unchanged. "That's a worldwide thing that stays the way it is," he told reporters.
What Were the EU Tariffs Before Trump's Presidency?
Given the absence of a free trade agreement between the U.S. and EU, the pair have historically traded using the most-favored nation tariffs under World Trade Organization rules.
According to analysis by the economic think tank Bruegel, the average rate of tariffs on European imports was around 1.4 percent prior to Trump taking office, and his succession of tariff announcements threatened to push this average rate up to over 15 percent. However, sector-specific tariffs were higher on a range of agricultural products, as well as certain vehicles.
Meanwhile, the EU reported in February that most U.S. exports were duty-free or faced a roughly 1-percent tariff. However, higher charges are also placed on certain products, including a 10-percent tariff on vehicles and apparel taxes of 12 percent, according to CNBC.
What People Are Saying
European Commission President Ursula von der Leyen, in a statement following the meeting, said: "Today with this deal, we are creating more predictability for our businesses. In these turbulent times, this is necessary for our companies to be able to plan and invest. We are ensuring immediate tariff relief. This will have a clear impact on the bottom lines of our companies. And with this deal, we are securing access to our largest export market.
"At the same time, we will give better access for American products in our market. This will benefit European consumers and make our businesses more competitive. This deal provides a framework from which we will further reduce tariffs on more products, address non-tariff barriers, and cooperate on economic security. Because when the EU and U.S. work together as partners, the benefits are tangible on both sides."
Chris Beauchamp, chief market analyst at global trading and investing platform IG, told Newsweek: "For the second time in a week, President Trump has been able to proclaim a trade deal with one of the U.S.' key partners. Like the Japan deal, it seems to involve the U.S. slapping on tariffs while the other side pledges to open up its markets.
"Tariffs continue to be defanged as an issue, and the announcement of yet another 90-day pause for China merely underlines the view that Washington is now closing down the issue having gained a series of 'wins.' Now we wait to see whether the tariff price increases do start to show up in inflation data."
Robert Basedow, professor of international political economy at the London School of Economics, told Newsweek: "I do not expect the deal to put trans-Atlantic differences over trade to rest. We have seen it in the past that Trump reneges on trade deals and seeks to renegotiate them…Hence, I expect the Trump administration to come back with new demands or complaints as opportune to him (typically for domestic policy reasons).
"These Trump deals are not classic trade agreements that pass through parliament and are of hard law nature," he added. "They are more akin to political agreements, with often limited technical detail and thus scope for diverging interpretations."
What Happens Next?
Von der Leyen described the deal as "a framework." She added that there were certain details yet to be ironed out, France 24 reported, and that this would happen "over the next few weeks." The deal remains subject to EU member state approval. The bloc's ambassadors will meet on Monday for a debrief from the European Commission.
Basedow told Newsweek that von der Leyen "will get a lot of pushback from member states, businesses, and media over this deal," which will hold "EU-internal political ramifications."