On 27 July, European Commission President Ursula von der Leyen and US President Donald Trump gathered at one of Trump’s golf courses in Scotland to announce a preliminary agreement on trade and tariffs. The deal was reached just a few days short of the 1 August deadline, after which EU export goods to the US would have been subjected to a 30% baseline tariff. The press conference’s setting foreshadowed an asymmetrical agreement in favour of the US, which mandates a 15% baseline tariff on EU exports to the US with limited exceptions, and a commitment from the EU to increase its purchases of US energy and boosting overall investments. The EU and US still appear to interpret a number of measures differently, including on digital trade barriers, purchase of military equipment, and steel and aluminium tariffs, leading to uncertainty on the shape of the preliminary text.
Cutting to the chase
Most EU exports will be affected by the 15% tariff – from cars to semiconductors and pharmaceuticals. Brussels and Washington agreed to cooperate on measures to address overcapacity of steel and aluminium, but it remains unclear what will happen to the 50% tariff currently in place for those materials. While the EU suggests that the agreement cuts the current rate, the US underlined that the 50% duty will remain in place. There are also some exceptions for strategic goods, such as aircraft components, selected chemicals, generic medicines, semiconductor equipment, natural resources, critical raw materials, and certain agricultural products. Both parties also want to liberalise the trade of agricultural and industrial goods and reduce non-tariff barriers in those sectors, although it is unclear whether the two blocs share the level of ambition for the latter commitment. A sticking point is getting rid of digital trade barriers, which the White House underlined as a win, but the Commission has not mirrored in its communication on the deal.
Per the agreement, the EU will cash out by increasing its purchases of US energy to $750 billion, though experts are sceptical of the bloc’s capacity to meet this target. It represents a significant increase over current levels of US energy purchases by the EU, which stood at only €76 billion in 2024. US suppliers are also likely to struggle with supplying such volumes of energy products. Aside from energy, the EU pledged to invest $600 billion more than currently planned in the US. This would be sourced from private investment as opposed to EU public finance. Other commitments include funnelling funds into AI chips to support European gigafactories and investing into US-made military equipment – though the Commission stressed lack of agreement on arms so far. All in all, the objectives are not yet legally set in stone and their enforcement will depend on future bilateral agreements or implementing legislation.
Reactions to the deal
So far, the agreement has received mixed reactions as it appears to try to mitigate the damage rather than stand up to the US – and does not measure up to EU executive’s previous threats of deploying the Anti-Coercion instrument, also known as the “trade bazooka.” The day after the announcement, ambassadors from across the EU countries gathered to discuss the technicalities.
The fans of the deal include Germany, whose Chancellor welcomed praised the lower tariffs on cars, alongside his counterparts from Romania, Slovakia and Finland. In opposition was France – PM Bayrou denounced the agreement as “submission”, echoed by Hungarian PM Orbán, who referred to von der Leyen as a “featherweight” compared to Trump. Other leaders were more cautious: Italy’s PM Meloni called the deal “positive”, but opted to elaborate only when details emerge. Poland, Spain, Denmark, Sweden, and Ireland conceded that the agreement is tough, but preferred over a trade war.
European trade associations were not as positive. The German Association of the Automotive Industry (VDA) welcomed the end of EU-US trade tensions but warned that new tariffs will burden EU manufacturers. The Federation of German Industries defined the deal as an “inadequate compromise” that sends a “disastrous signal”. This mixed attitude was also reflected by the stock market – while Wall Street saw gains, European markets slid into the red after initial increases on early Monday.
What’s next for business?
The new agreement will now enter into force from 1 August, and the new duties will be enacted on the same day through President Trump’s executive order. The full text of the deal is not publicly available yet, and it is far also far from complete, with several elements still to be defined through technical negotiations. This gives the EU an opportunity to secure better conditions for its businesses, including potential new exemptions, which will remain at the core of upcoming EU negotiations with the US.
For the private sector, the agreement itself is a double-edged sword: it allows businesses to stop holding their breaths following months of uncertainty and shifting goalposts. On the other hand, new burdensome duties face almost every industry. European businesses should prepare for a volatile second half of 2025 and consider engaging with EU trade authorities early. Companies should also assess supply chain exposure and develop scenarios for pricing and margin pressure. In this phase, continued monitoring will be key to predict not just the next trade developments, but also develop strategies to get ahead of those changes.
Enrico Macciotta, Public Affairs Consultant