A month’s delay and the United States’ close to a comprehensive trade agreement have resulted in a full-fledged trade war, just days before President Donald Trump’s deadline to impose high tariffs.
Most goods, including cars, will be subject to 15% tariffs in the EU. Trump had threatened to implement the tariffs starting on Friday, but this one is only 30% higher. Additionally, Brussels and other nations agreed on Sunday to add hundreds of billions of dollars to already-depensed US weapons and energy products.
Trump praised the deal as the “biggest deal ever made” while speaking to reporters at his Scottish resort at Turnberry. “I believe it will be wonderful for both parties,” he said. It will bring us closer together, he continued.
Ursula von der Leyen, president of the European Commission, stated that the agreement would “bring stability” and “bring predictability that’s very important for our businesses on both sides of the Atlantic.”
Von der Leyen defended the agreement, claiming that the goal was to restore a trade surplus between the US and China. Trump has never made it a secret to evade US trade restrictions by using tariffs.
Although neither side disclosed the full details of the pact or made any written announcements, Sunday’s agreement marked the end of months of frequently tense shuttle diplomacy between Brussels and Washington.
Following a 90-day trade pact with China and preliminary trade agreements with Japan, the United Kingdom, Indonesia, Vietnam, and the Philippines, the US signed them.
How will the agreement affect the two parties, who control almost a third of global trade, and put an end to the threats of a tariff war?
What was agreed upon?
Von der Leyen stated at a news event that the country’s cars, pharmaceuticals, and semiconductors, which are crucial components of the European economy, would be subject to a 15% tariff.
Trump, for his part, criticized industry in the bloc for rejecting US levies on steel and aluminum, which he has set at 50% on many nations. For the time being, aerospace tariffs will be at zero elsewhere.
Trump claimed that the bloc would “open up their countries at zero tariff” for American exports in exchange for the 15% tariff on EU goods.
He added that the EU would invest $600 billion in US energy products, spend an additional $750 billion on military equipment, and purchase “hundreds of billions of dollars” of military equipment.
Von der Leyen stated that starting in 2027, the EU would aim to purchase an additional $250 billion worth of US energy products annually.
She said, “We are securing access to our largest export market with this agreement.”
She also acknowledged that some of Europe’s industries would face challenges as a result of the 15% tariffs.
With nearly $ 2 trillion in two-way trade in goods and services in 2017, the EU is the largest trading partner of the US.
What has the leadership of Europe said?
Friedrich Merz, the German chancellor, applauded the deal, citing its preventative effect on “transatlantic trade relations.”
He claimed that a trade war “would have severely affected Germany’s export-oriented economy,” noting that US tariffs would have been reduced from 27.5 percent to 15 percent for the German auto industry.
The bloc had caved in to the US president with an unbalanced deal that spared US imports from any immediate European retaliation, according to French Prime Minister Francois Bayrou, who described the deal as “dark day” for Europe.
An alliance of free peoples, organized to affirm their shared values and advance their shared interests, submits to the “von der Leyen-Trump deal” in his op-edition of X.
The deal with the EU was “accepting painful tariffs,” according to Wolfgang Niedermark, a trade body member on the board of the Federation of German Industries.
He predicted that a 15% tariff would “significantly harm Germany’s export-oriented industry.”
The trade agreement, according to France’s European affairs minister Benjamin Haddad, will provide temporary stability to economic actors who are threatened by the rise in American tariffs, but it is unbalanced.
Dutch Foreign Trade Minister Hanneke Boerma echoed that sentiment and demanded that the commission hold talks with Washington in response.
The entire bloc’s trade negotiations are handled by the European Commission.
This week, EU ambassadors will talk about the deal with the commission.
Before the deal, how was trade conducted?
If the two sides can’t agree on a deal by this Friday, the day that Trump’s “reciprocal tariffs,” which he imposed on nearly all of the world’s nations, will be implemented, he threatened to impose tariffs of 30 percent on EU goods on July 12.
In addition to the 25% tariffs on cars and car parts and the 50% levy on steel and aluminum products that Trump has already in place, these “reciprocal tariffs” are scheduled to go into effect.
If negotiations had broken down, it is believed that Brussels would have pushed ahead with a retaliatory tariffs package on 90 billion euros ($109bn) of US goods, including car parts and bourbon.
Trump frequently targeted the EU with his accusations that the bloc was “ripping off” the US.
In 2024, the US ran a $235.6bn goods deficit with the EU. According to EU data, pharmaceuticals, automotive parts, and industrial chemicals accounted for Europe’s biggest exports to the US.
What effects will the US and EU have on the deal?
A no-deal outcome, according to Bloomberg Economics, would have increased Friday’s effective US tariff rate to nearly 18%.
That figure is decreased by 16 percent thanks to the new agreement, which provides a temporary respite for European exporting companies. Trade barriers remain significantly higher than they were before Trump’s 2025 take office.
At the end of 2024, the average US tariff rate on EU exports was only 1.5 percent, according to a research group called Bruegel.
The Milken Institute’s chief economist, William Lee, stated to Al Jazeera, “I think the Trump strategy has been crystal-clear from the beginning. It’s brinkmanship, I suppose. … or be subject to high tariffs if you partner with the US.
