US-European Union Trade Deal: Cars To Computer Chips, What Will Get Costly After 15% Tariff?

Last Updated:July 29, 2025, 15:44 IST

The tariffs, or import taxes, paid when Americans buy European products could raise prices for US consumers and dent profits for European companies who bring goods there

President Donald Trump and European Commission President Ursula von der Leyen shake hands after reaching a trade deal at the Trump Turnberry golf course in Scotland. (Reuters)

President Donald J. Trump on Monday announced a trade deal with the European Union (EU), fundamentally rebalancing the economic relationship between the world’s two largest economies.

“The United States and European Union reached a Cooperation Agreement on Reciprocal, Fair and Balanced Trade. The EU will purchase $750 billion in U.S. energy and make new investments of $600 billion in the United States, all by 2028," said the White House.

The tariffs, or import taxes, paid when Americans buy European products could raise prices for U.S. consumers and dent profits for European companies and their partners who bring goods into the country.

What is the US-EU agreement?

The European Union will pay the United States a tariff rate of 15%, including on autos and auto parts, pharmaceuticals, and semiconductors. This is lower than the 20 per cent Trump originally proposed, and much less than the 50 per cent and 30 per cent rates he had previously threatened. While it covers 70 per cent of the European goods, the remaining 30 per cent are still being negotiated.

However, the sectoral tariffs on steel, aluminium, and copper will remain unchanged—the EU will continue to pay 50% and the parties will discuss securing supply chains for these products.

According to the White House, this deal will enable US farmers, ranchers, fishermen, and manufacturers to increase US exports, expand business opportunities, and help reduce the goods trade deficit with the European Union. The EU will remove significant tariffs, including the elimination of all EU tariffs on US industrial goods exported to the EU.

While a joint statement will be released soon, the specifics will still be hammered out further.

The tariff math

The 15% rate removes Trump’s threat of a 30% tariff. But it effectively raises the tariff on EU goods from 1.2% last year to 17% and would reduce the 27-nation bloc’s gross domestic product by 0.5%, Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics told AP.

Higher tariffs, or import taxes, on European goods mean sellers in the US would have to either increase prices for consumers — risking loss of market share — or swallow the added cost in terms of lower profits. The higher tariffs are expected to hurt export earnings for European firms and slow the economy.

It could raise prices for American buyers for European cars, computer chips or pharmaceuticals.

Additional key terms of the US-European Union Agreement

The EU will invest $600 billion in the United States over the course of President Trump’s term. This new investment is in addition to the over $100 billion EU companies already invest in the United States every year.

The EU will double down on America as the Energy Superpower by purchasing $750 billion of U.S. energy exports through 2028.

The European Union will work with the United States to eliminate tariffs in various sectors and will provide meaningful quotas for other products, which when combined will create commercially meaningful market access opportunities for a significant amount of U.S. goods exports to the European Union, supporting high-quality American jobs.

The United States and the European Union intend to work together to address non-tariff barriers affecting trade in food and agricultural products, including streamlining requirements for sanitary certificates for U.S. pork and dairy products.

The United States and the European Union will establish strong rules of origin to ensure that the benefits of this agreement flow directly to the United States and the European Union, not to third countries.

The United States and the European Union intend to address unjustified digital trade barriers.

The United States and the European Union agree to strengthen economic security alignment to enhance supply chain resilience and innovation.

The United States and European Union recognise a series of major commercial agreements across key sectors—including energy and semiconductors—that will further expand U.S. exports to the European market.

The European Union agreed to purchase significant amounts of U.S. military equipment.

With AP, Agency Inputs

News explainers US-European Union Trade Deal: Cars To Computer Chips, What Will Be Costlier After 15% Tariff?