The United States and European Union have agreed to cap tariffs on European cars, pharmaceuticals, and semiconductors at 15 percent, finalizing a deal that prevents an all-out trade war and expands cooperation in key sectors.
The United States and European Union agreed Thursday to cap tariffs on European cars, pharmaceuticals, and semiconductors at 15 percent, locking in a deal that averts a full-blown transatlantic trade war. The agreement, outlined in a joint statement, follows weeks of negotiations and builds on a handshake deal between US President Donald Trump and European Commission President Ursula von der Leyen.
EU Trade Commissioner Maroš Šefčovič hailed the deal as the result of “intense, essential work.” “This is not the end; it’s the beginning. This framework is a first step,” Šefčovič said at a news conference.
The four-page agreement sets new terms for transatlantic trade. The US will lower tariffs on autos and auto parts from 27.5 percent to 15 percent, but only after the EU enacts legislation to “eliminate tariffs on all US industrial goods.” The EU currently has a 10 percent tariff on car imports. Šefčovič confirmed the Commission will initiate that legislation this month, ensuring US tariff reductions on European autos will take effect August 1 and be applied retroactively.
The EU will also expand market access for US agricultural goods that are not considered sensitive. The US, for its part, will exempt aircraft, aircraft parts, cork, and generic drugs from higher tariffs and apply its most-favored nation (MFN) rate.
The two sides agreed to work together on challenges like steel and aluminum overproduction, exploring the use of tariff-rate quotas, and to coordinate against countries, including China, that restrict exports of critical minerals.
The European Commission will consider providing “additional flexibilities” in the implementation of its carbon border tax for US firms, and ensure that EU sustainability and supply chain rules do not pose undue barriers to transatlantic trade.
The EU will procure $750 billion in US energy, including liquified natural gas, oil, and nuclear products, through 2028 and purchase at least $40 billion of US AI chips. European companies are expected to invest another $600 billion in strategic US sectors by 2028.
The deal emerged from negotiations to prevent Trump’s threatened 30 percent across-the-board tariff on EU imports. Šefčovič described the agreement as a “serious, strategic deal” and warned that the alternative would have been “a trade war with sky-high tariffs and political escalation.”
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