Source: Channel News Asia
Date: 28th July 2025

15% baseline tariffs were agreed upon with exemptions for strategic sectors; energy, defence, and investment commitments were included in the sweeping deal.

The European Union and the United States have reached a major trade agreement to de-escalate growing tensions and avoid a looming tariff hike. The deal introduces a 15% across-the-board tariff on EU exports to the US, including critical sectors such as automobiles, pharmaceuticals, and semiconductors.

The breakthrough came just days before a 30% tariff was set to take effect, averting what both sides feared could have spiralled into a trade war. Leaders described the agreement as the most significant ever achieved in transatlantic trade relations.

In exchange for the tariff terms, the EU committed to purchasing US$750 billion worth of American energy over three years, including liquefied natural gas, oil, and nuclear fuel, as part of efforts to diversify away from other geopolitical suppliers.

The bloc also pledged an additional US$600 billion in investments and large-scale defence equipment purchases, reinforcing transatlantic cooperation under defence alliances. The agreement also secured tariff exemptions on strategic products such as aircraft, select chemicals, critical raw materials, and some agricultural goods, with further zero-tariff negotiations ongoing for categories like alcohol.

Despite diplomatic praise, the deal received a mixed reaction within the EU.

Industry groups voiced concern over the high tariff rate, particularly given the EU’s ongoing exposure to earlier waves of levies on cars, steel, and aluminium. While the US declined to lift tariffs on steel outright, EU officials indicated a quota-based system would be introduced.

Without the deal, the EU had prepared retaliatory tariffs on over US$100 billion in US goods. The agreement now faces formal review and approval from EU member states.