Frankfurt, Germany (AP) – President Donald Trump President of the European Commission has Announced a radical trade agreement This places a 15% tariff on most European goods, and is driving away Trump’s 30% threat if the transaction is not reached by August 1st.
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’s what you need to know about the trade agreement between the US and the European Union:
What is the contract?
The announcement by Trump and von der Leyen came when Trump visited one of Scotland’s golf courses, leaving him with many details to fill out.
The heading figures are 15% tariff rates for the “majority” of European goods brought to the US, including automobiles, computer chips, and pharmaceuticals. It’s lower than the 20% Trump originally proposed, 50% and then 30% below the threat.
Von Der Leyen said both sides agreed to zero tariffs on both sides on a variety 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, the EU will buy what Trump said and replace Russia’s energy supply with $750 billion (€638 billion) of natural gas, oil and nuclear fuel, while Europeans will invest another $600 billion (€5.1 billion) in the US.
What are you missing in the transaction?
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 were not included in the transaction. Von Der Leyen said the drug issue was “on another paper” from Sunday’s deal.
No location was specified for the $600 billion to be generated for additional investment. 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 is the impact?
A 15% fee removes the Trump threat of 30% tariffs. It’s much higher than Trump’s minimum 10% baseline fee, much higher than the average tariff before Trump took over about 1% of his job.
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.
A 10% baseline was applied while the deal was negotiated, but it’s already high enough for the European Union Executive Committee to reduce its growth forecast for this year from 1.3% to 0.9%.
Von Der Leyen praised the deal for the 15% rate, which was “the best thing we can do,” maintaining access to the US market and providing “stable and predictable for both companies.”
What is your response to the transaction?
German Prime Minister Friedrich Merz welcomed the contract that avoided “an unnecessary escalation in transatlantic trade relations,” adding that “we would have wanted further relief for transatlantic trade,” but said “we were able to maintain our core interests.”
The German Industrial Federation was a fuss. “Even a 15% tariff rate will have a major negative impact on export-oriented German industry,” said Wolfgang Niedermark, a member of the federal leadership.
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, today’s agreement clearly ends with the uncertainty of recent months. The escalation of tensions in US trade would have been a serious risk to the global economy,” Bruzeski said.
“This risk seems to have been avoided.”
How about the car companies?
When asked if European carmakers could still sell cars 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.
It is likely that some companies will have an impact given that automaker Volkswagen has said it suffered 1.3 billion euros ($1.5 billion) of profits from higher tariffs in the first half of the year.
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 said it expects prices to “severely rise” over the next few years.
What was the problem of splitting both sides?
Before Trump took office, the US and the EU maintained generally low tariff levels in the world’s largest bilateral trade relationship, with annual trade of around 1.7 trillion euros ($2 trillion). Together, the US and the EU have 44% of the global economy. According to Brussels’ Brugel think tank, US prices averaged 1.47% for European products, while the EU averaged 1.35% for American products.
Trump has complained about the surplus of the EU’s 1.9 billion copies trade. This shows that Americans buy from European companies from different European companies, and 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 US-owned companies.
