David Mchugh, Sam McNeil, Samuel Petrequin, Associated Press
Frankfurt, Germany (AP) — US President Donald Trump and European Commission’s Ursula von der Leyen have announced a drastic trade agreement that imposes 15% tariffs on most European goods, and that if the transaction is not reached by August 1, it will drive Trump’s threat to a 30% rate.
The tariffs, or import taxes paid when Americans buy European products, can raise prices for US consumers and make profits for European companies and partners bringing goods to the country.
Here are some things you need to know about trading:
Unresolved details
The announcement of Trump and von der Leyen comes when Trump visits one of Scotland’s golf courses and requires many important details to be filled out.
The headline figures are 15% tariff rates, about 70% of European goods brought to the US, such as cars, computer chips, and drugs. It’s lower than the 20% Trump originally proposed, and his threat is 50% and then 30%.
The remaining 30% is still open to further decisions and negotiations.
Von Der Leyen said both parties agreed to zero tariffs for a range of “strategic” products, including aircraft and aircraft parts, certain chemicals, semiconductor equipment, certain agricultural products, some natural resources and important raw materials. Details were missing.
She said both sides would “continue to work” to add more products to the list.
Additionally, EU companies will buy what Trump said is $750 billion worth of natural gas, oil and nuclear fuel over three years to replace Russia’s energy supply, which Europe is about to withdraw in any case.
Meanwhile, European companies will invest another $600 billion in the US under a non-legally binding political commitment, officials said.
Not written yet
Brussels and Washington will soon issue a joint statement that will frame the deal but are not yet legally binding, according to senior officials who are not permitted to be publicly appointed in accordance with European Commission policies.
The joint statement “must spell it out in a variety of ways, including a very accurate commitment,” said a senior European Commission official.
EU officials said the zero tariff list includes nuts, pet food, dairy products and seafood.
Steel tariffs remain
Trump said there will remain a 50% US tariff on imported steel. Von Der Leyen said both sides have agreed to further negotiations to combat global steel overload, reduce tariffs and establish an import quota.
Trump said drugs, the major imports of the EU to the US, are not included in the transaction. Von Der Leyen said the drug issue was “on another paper” from Sunday’s deal.
von der Leyen said that when it comes to agricultural products, the EU has made it clear that there were “customers that could not be reduced” without specifying which products.
“What we can do”
A 15% fee removes the Trump threat of 30% tariffs. However, tariffs on EU goods will effectively raise its tariffs to 17% from 1.2% last year, reducing gross domestic product in 27 countries by 0.5%, said Jack Allen-Reynolds, Capital Economics’ Associate Chief Eurozone Economist.
Duties or import taxes on European goods mean that US sellers must raise consumer prices – risk losses in market share or engulf additional costs in relation to lower profits. Higher tariffs are expected to damage export revenues for European companies and slow the economy.
Von Der Leyen praised the deal by saying the 15% rate was “the best thing we can do,” and maintaining access to the US market and providing “stable and predictable for both companies.”
Mixed reaction
German Prime Minister Friedrich Merz welcomed the contract that avoided “an unnecessary escalation in transatlantic trade relations,” saying “we were able to maintain our core interests.”
A French official on Monday criticized the consent. Strategy Commissioner Clement Bohne said the deal did not reflect the economic strength of the bloc.
“This is an unequal and disproportionate agreement,” he said. “Europe has not used that strength. We are the world’s leading trade force.”
The rates are lower than threatened, but “the big warning about today’s trading is that there’s nothing on paper yet,” said Carsten Brzeski, global chief of ING Bank’s macros.
“At face value with this disclaimer in mind, the agreement will clearly end the uncertainty of recent months. The escalation of US-EU trade tensions would have been a serious risk to the global economy,” Bruzeski said.
“This risk seems to have been avoided.”
Car prices
Asked if European carmakers could still sell cars profitably at 15%, von der Reyen said the rate was much lower than the current 27.5%. This is an existing US car rate of 2.5%, plus a 25% tariff-based rate on cars in all Trump countries.
The impact could be huge for some companies, given that automaker Volkswagen said it had hit 1.3 billion euros ($1.5 billion) in profits in the first half of the year due to higher tariffs.
The US Mercedes-Benz dealer has said it will hold the line “until further notice” at 2025 model year prices. The German automaker has a partial tariff shield, as it manufactures 35% of Mercedes-Benz vehicles sold in the US in Tuscaloosa, Alabama, but the company says it expects prices to experience a “severe increase” over the next few years.
Trade gap
Before Trump took office, the US and the EU maintained tariff levels, generally the world’s largest bilateral trade relationship, with annual trade of around $2 trillion.
Together, the US and the EU have 44% of the global economy. According to Brussels’ Bruegel think tank, US prices averaged 1.47% for European products, while the EU averaged 1.35% for American products.
Trump has complained about the EU’s $232.5 billion trade surplus. This shows that Americans buy more from European companies than other ways, saying that the European market is not open enough to American cars.
However, American companies will fill some of the trade gaps by selling the EU in regards to services such as cloud computing, travel bookings, legal and financial services. According to the European Central Bank, approximately 30% of European imports come from American-owned companies.
Sam McNeill and Samuel Petrekin reported from Brussels. Thomas Adamson of Paris and Gaia Moolson of Berlin contributed to this report.
Original issue: July 28, 2025 10:03am EDT
