The European Union and the United States have unexpectedly reached an agreement on a new trade deal that sets a fixed 15% tariff on most European goods, including cars and pharmaceuticals. Many experts expected the EU to take a firmer stance in response to US pressure, but Brussels largely conceded to Washington's key demands.
Under the deal, Europe committed to purchasing nearly one trillion dollars' worth of American energy resources over three years, as well as increasing investments in the US by more than $600 billion. The EU also agreed to procure US military equipment, partly for Ukraine.
In exchange, both sides agreed to eliminate tariffs on select goods, including aircraft, certain parts, equipment for microchips, and some agricultural products. These measures are intended to boost trade and strengthen economic ties in response to growing competition with China. However, tariffs on steel and aluminum remain at 50%.
Pharmaceuticals and semiconductors are subject to the new 15% tariff with no exceptions, and the US has launched investigations into the import of these goods. No decision has been made regarding tariffs on wine and alcohol. While the agreement is described as a compromise, many experts believe the EU has made more concessions. The US courts may still overturn parts of the deal if actions by the Trump administration are found unconstitutional due to the lack of Congressional approval.
The agreement has already calmed markets by reducing the risk of a full-scale trade war that could have led to a global economic crisis. European politicians see the deal as a lifeline for export-oriented economies. For Ukraine, stability between its main allies is especially important amid the ongoing conflict. The US side aims to make the 15% tariff a standard for major trade partners, a substantial increase from the previous 2.5% rate.
Ultimately, both parties have stepped back from confrontation, allowing more time to seek further solutions. The future developments will depend on the details of implementation and the response of other US trading partners to the new framework.
