Trade tensions cool as U.S., EU reach agreement

July 28, 2025 (MLN): President Donald Trump declared that the United States has reached a significant trade agreement with the European Union, just days before the looming August 1 tariff deadline.

The deal follows high-level discussions with European Commission President Ursula von der Leyen.

Under the terms of the agreement, the U.S. will impose a 15% tariff on most European goods, including automobiles.

However, some products such as aircraft and their components, certain chemicals, and pharmaceuticals will be exempt, von der Leyen confirmed during a post-announcement briefing.

She also clarified that the new 15% tariff will not be applied on top of any existing tariffs.

The 15% rate marks a compromise between the 30% tariff previously threatened by President Trump and the 10% level the EU had hoped for.

In addition to tariffs, the European Union has committed to purchasing $750 billion worth of U.S. energy and making an additional $600bn in investments into the U.S., beyond current levels.

Trump also stated that the bloc would be “purchasing hundreds of billions of dollars worth of military equipment,” although he did not specify an exact figure.

“It’s a very powerful deal, it’s a very big deal, it’s the biggest of all the deals,” Trump said during a joint appearance with von der Leyen.

“It’s a good deal, it’s a huge deal, with tough negotiations,” von der Leyen echoed following the meeting.

Leading up to the agreement, there had been considerable uncertainty, as CNBC reported.

Brussels prepared for a potential no‑deal scenario, including approval of a package of counter‑tariffs and consideration of deploying the EU’s “Anti‑Coercion Instrument,” dubbed the bloc’s “trade bazooka.”

The announcement was met with relief and cautious optimism across Europe.

Ireland’s Prime Minister Micheál Martin said the deal “brings clarity and predictability to the trading relationship between the EU and the US.”

However, Ireland’s Department of the Taoiseach noted that the increased tariffs would make transatlantic trade “more expensive and more challenging.”

German Chancellor Friedrich Merz welcomed the deal, emphasizing its importance to Germany’s export-driven economy, particularly the auto industry.

 “With the agreement in the EU-US negotiations on tariffs a trade conflict, which would have hit the export-oriented German economy hard, has been avoided,” he stated.

He highlighted the reduction of tariffs on automobiles from 27.5% to 15% as particularly significant.

Dutch Prime Minister Dick Schoof commented on social media that “no tariffs would have been better,” but praised the European Commission for securing the best possible outcome.

“The deal provides more clarity for our businesses and brings more market stability,” he added.

Italian Prime Minister Giorgia Meloni and her government also welcomed the deal, describing it as one that helps avoid a “direct clash between the two sides of the Atlantic” and “guarantees stability” in U.S.-EU relations.

The statement from Italy emphasized that the 15% tariffs were “sustainable” so long as they were inclusive of, and not in addition to, previous tariffs.

The U.S.-EU trade relationship, valued at €1.68 trillion ($1.97tr) in 2024, remains one of the world’s largest.

While the EU maintained a goods surplus with the U.S., it recorded a deficit in services, resulting in an overall surplus of approximately €50bn last year.

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