Trump, EU Trade Deal: 'Biggest Ever' Deal To Levy 15% Tariff On EU Exports

On Sunday, the United States and the European Union reached what President Donald Trump called the "biggest-ever" agreement to end a transatlantic tariff dispute that was on the verge of degenerating into a full-scale trade war.  

AFP reports. following a high-stakes meeting at his golf estate in Scotland with European Commission President Ursula von der Leyen, Trump declared that EU exports to the US would be subject to a baseline tariff of 15%.

A 'Good Deal' For Everybody

The leaders reached the agreement in about an hour, with a deadline of August 1st looming to prevent a 30 per cent US charge on all European exports.

"We've reached a deal. It's a good deal for everybody. This is probably the biggest deal ever reached in any capacity," said Trump.

Reportedly, Trump said that the 15 per cent levy will be applied to all industries, including semiconductors, medicines, and Europe's vital car industry.

Trump said that as part of the agreement, the 27-nation EU group had committed to investing an additional $600 billion and buying "$750 billion worth of energy" from the US.

As part of the bloc's effort to diversify away from Russian supplies, von der Leyen stated that the "significant" purchases of US oil, nuclear fuels, and liquefied natural gas would be spread out over three years.

The EU chief called it a “good deal”. She said, "It will bring stability. It will bring predictability. That's very important for our businesses on both sides of the Atlantic."

According to von der Leyen, bilateral tariff exclusions have been agreed upon for a number of "strategic products," including essential raw minerals, airplanes, some chemicals, and some agricultural products.

The EU, according to her, is still hoping to reach more so-called "zero-for-zero" accords, particularly for alcohol, which she claimed would be "sorted out" in the days ahead.

Additionally, Trump stated that the European Union, which has promised to increase its defence budget under NATO, will be investing "hundreds of billions of dollars worth of military equipment."

Differing Opinions Of The EU

While Trump claims that this deal will be beneficial for “everyone” in the EU, leaders disagree.

The French prime minister, François Bayrou, called this deal a “dark day” for the EU. He claimed that the EU has capitulated to Donald Trump’s threats of ever-increasing tariffs. 

“It is a dark day when an alliance of free peoples, brought together to affirm their common values and to defend their common interests, resigns itself to submission,” Bayrou wrote on X on Monday.

Meanwhile, the Guardian reports that the German chancellor, Friedrich Merz, and the Italian prime minister, Giorgia Meloni, welcomed the deal, which the European trade commissioner Maroš Šefčovič described on Monday as a “breakthrough” in the face of a potential ruinous trade war between the world’s two biggest economies.

According to The Guardian, as Brussels looks to gain member state approval for the pact, the high-level French opposition and Emmanuel Macron's quiet stance since the agreement was reached between Trump and Ursula von der Leyen, the president of the European Commission, suggest possible divides.

Meloni praised the agreement, claiming that it had prevented "potentially devastating" outcomes.

A "trade escalation between Europe and the US would have had unpredictable and potentially devastating consequences," she said at a conference in Ethiopia, adding that Rome would need to "study the details" of the agreement.

Despite the deal being welcomed by Italy and Germany, France made its disapproval clear.

“This state of affairs is not satisfactory and cannot be sustained,” the French European affairs minister, Benjamin Haddad, said on X, urging the EU to activate its “anti-coercion instrument”, which would allow for non-tariff retaliation.

"Donald Trump only understands force," said French Trade Minister Laurent Saint-Martin on France Inter radio, criticising the EU's handling of the negotiations.  "It would have been preferable to react by demonstrating our ability to strike back sooner.  Additionally, the agreement might have looked different.

Reportedly, Senior officials have revealed new information on the agreement, stating that 70% of goods supplied to the US will be subject to the 15% tariff on EU exports.

Winners And Losers

BBC, in their report on the trade deal, listed out who stands to gain and lose from this deal. 

Reportedly identifying the “winners” to be Trump, the markets, US carmakers, the US energy industry, and the aviation industry in the US and the EU. 

Following the release of the deal framework, Asian and European stock markets saw increases on Monday. The framework calls for the US to impose a 15% tariff on EU imports.  Even though this rate is noteworthy, it is below its potential and at least provides investors with certainty, reported the BBC.

The news that the EU was reducing its tariff on automobiles built in the US from 10% to 2.5% gave American automakers a lift.  That might, in theory, lead to more American automobiles being purchased in Europe.

Trump said the EU will purchase $750bn (£558bn, €638bn) in US energy, in addition to increasing overall investment in the US by $600bn. "We will replace Russian gas and oil with significant purchases of US LNG [liquified natural gas], oil and nuclear fuels," said Von der Leyen.

Additionally, Von der Leyen said that some "strategic products" will not attract any tariffs, including aircraft and plane parts, certain chemicals and some agricultural products. That means firms making components for aeroplanes will have friction-free trade between the huge trading blocs.

Meanwhile, the “losers”, according to the BBC, are the US economy, European solidarity, German carmakers, and EU pharmaceuticals. 

A proposed 15% tariff on EU goods may increase prices for American consumers already struggling with high living costs. While not as steep as earlier trade barriers, the tariff is still significant. Since importers usually pass on these added costs, everyday products could become noticeably more expensive.

Trump set a 27.5% tariff in April, but it has now been cut in half to 15% for importers bringing cars from the EU to the US. One of the main exports from the EU to the US is automobiles.  And Germany, the EU's biggest automaker (thanks to VW, Mercedes, and BMW), will have been keeping a careful eye on things. The VDA, a trade association for German automakers, reiterated this pessimistic view, stating that even a 15% rate would "cost the German automotive industry billions annually".

There is confusion around the tariff rate that will be levied on European-made drugs being bought in the US. The EU wants drugs to be subject to the lowest rate possible, to benefit sales.

Trump said pharmaceuticals were not covered by the deal announced on Sunday, under which the rate on a number of products was lowered to 15%. But von der Leyen said they were included, and a White House source confirmed the same to the BBC.