The trade deal will introduce a 15% tariff for the vast majority of EU products. But some will benefit from a “zero-for-zero” scheme.
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The European Union and the United States have struck a tentative trade deal to avert a potentially devastating tariff war between two of the world’s largest economies, capping a race against time before a self-imposed deadline of 1 August.
Under the agreed terms, finalised on Sunday by European Commission President Ursula von der Leyen and US President Donald Trump during a meeting in Scotland, the majority of EU exports bound for the American market will be subject to a 15% tariff.
The tariff for US exports bound for the EU market was not immediately clear.
The deal is preliminary and needs to be further fleshed out.
“I think it’s great we made a deal today instead of playing games,” Trump said at the end of the meeting. “I think it’s the biggest deal ever made.”
“It’s a big deal. It’s a huge deal,” von der Leyen said. “It will bring stability, it will bring predictability. That’s very important for businesses on both sides of the Atlantic.”
Von der Leyen noted the 15% tariff would be “across-the-board” and “all-inclusive”, blocking the application of other duties.
“It was tough negotiations (but) we came to a good conclusion,” she said, highlighting the “openness” of the EU market, which Trump had vehemently challenged.
Both leaders shook hands to applause in the room.
“We were able to make a deal that’s satisfactory to both sides, so it’s a very powerful deal. It’s the biggest of all the deals,” Trump said.
The 15% rate is lower than the 20% rate that Trump imposed, and later paused, in April as part of his contentious, self-styled “reciprocal tariffs”, as well as the 30% rate that he threatened to slap in a letter sent to von der Leyen earlier this month.
The 15% rate is also inferior to the rates that other countries have negotiated with the White House in recent days, including Indonesia (19%) and the Philippines (19%), and matches the number granted to Japan (15%), a G7 ally.
The von der Leyen-Trump meeting took place in Scotland.
AP Photo
Still, it represents a painful concession, considering the talks began with von der Leyen offering a “zero-for-zero” tariff agreement. Through the back-and-forth process, von der Leyen repeatedly warned that “all options”, including a never-used instrument against economic coercion, were on the table in case of an undesirable scenario.
As tensions mounted, the European Commission prepared several lists of retaliatory measures against US products worth €93 billion in total.
Brussels never resorted to any tit-for-tat measure due to stark differences between member states. Some countries, like France and Spain, advocated a show of force against Washington, while others, like Germany and Italy, pushed for a quick deal.
The ideological gap closed after Trump made his out-of-the-blue 30% threat, which prompted outrage across the bloc and hardened the mood towards retaliation.
The end of the story?
Before Trump’s arrival disrupted transatlantic commerce, EU-made products were subject to an average tariff rate of 4.8% upon entering US territory. Sunday’s deal presumably entails an additional 10% to reach the 15% mark.
EU cars, which are today under a 27.5% tariff, will be brought under the 15% rate.
A “zero-for-zero” scheme will apply to aircraft and related components, semiconductor equipment, critical raw materials and some chemical and agricultural products.
“We will keep working to add more products to this list,” von der Leyen said.
Additionally, she explained, the bloc commits to spending over $250 billion per year on purchasing American liquefied natural gas (LNG), oil and nuclear fuels to replace Russian energy. The total pledge will amount to about $700 billion by the end of Trump’s term.
Asked about what concessions, if any, the US had made in the talks, the Commission chief replied with a general remark about shared prosperity.
“The starting point was an imbalance, a surplus (of goods) on our side and a deficit on the US side. We wanted to rebalance the trade relation, and we wanted to do it in a way that trade goes on between the two of us across the Atlantic,” she said.
“I think it’s going to be great for both parties,” Trump said.
Von der Leyen said the deal will create “good jobs” for both sides.
AP Photo
Sunday’s meeting in Scotland took place amid sky-high expectations due to the looming deadline of 1 August that Trump had imposed to force nations to either offer far-reaching concessions or face punishing tariffs.
Von der Leyen was accompanied by Maroš Šefčovič, the European Commissioner for Trade, who has been travelling across the two sides of the Atlantic Ocean in an attempt to gain a better understanding of the White House’s maximalist demands.
She was also joined by her powerful chef de cabinet, Björn Seibert; her trade advisor, Tomas Baert, and the Commission’s director general for trade, Sabine Weyand.
In the last stretch of negotiations, von der Leyen’s team had realised that 15% was the lowest number that Trump was willing to settle for. The 15% rate was considered high for the bloc but palatable if paired with carve-outs for strategic sectors.
A major concern along the way has been pharmaceuticals, which the EU exports in large volumes to the American market. The White House has opened a formal investigation into pharma products, a step that can pave the way for a tailor-made tariff.
At the start of the meeting, Trump said pharma would be excluded from the deal.
“We have to have them built and made in the United States, and we want them made in the United States,” Trump told reporters. “Pharmaceuticals are very special. We can’t be in a position where (…) we’re relying on other countries.”
At the end of the meeting, von der Leyen said EU-made drugs would fall under the 15% rate but admitted Trump could take further action to address the matter “globally”.
“15% is certainly a challenge for some, but we should not forget that it keeps us access to the American market,” she admitted, noting the bloc would continue to diversify its trade partners to create greater opportunities for European exporters and investors.
The saga might soon take another twist: next week, a federal appeals court in the US will begin hearing arguments in a closely-watched lawsuit challenging Trump’s authority to slap across-the-board tariffs under the pretext of a national emergency.
This article has been updated with more information.
