EU-US trade deal averts tariff crisis but sparks mixed reactions

Monday 28 July 2025 - 16:20

By: Dakir Madiha

EU-US trade deal averts tariff crisis but sparks mixed reactions

The United States and the European Union have reached a trade agreement aimed at avoiding severe tariffs on European goods. While the deal has been praised for preventing a transatlantic trade war, it has also drawn sharp criticism from some European leaders and industries.

Key terms of the agreement

The deal, struck on Sunday by US President Donald Trump and European Commission President Ursula von der Leyen, establishes a baseline tariff of 15 percent on most EU exports to the United States. This is significantly higher than the average 4.8 percent tariff that existed previously but much lower than the 30-percent blanket tariff initially threatened by Washington.

The agreement also includes:

Exemptions: Bilateral tariff exemptions for key goods such as aircraft, semiconductor equipment, certain chemicals, agricultural products, and critical raw materials.

Energy commitments: The EU pledged to purchase $750 billion worth of liquefied natural gas, oil, and nuclear fuels from the US over three years to diversify away from Russian energy sources.

Defense spending: EU countries agreed to ramp up purchases of US military equipment, amounting to hundreds of billions of dollars.

Steel compromise: A quota system was introduced to manage European steel exports to the US, with 50-percent tariffs applying only after the quota is exceeded.

Economic implications

The deal offers relief to the EU’s auto sector, which employs 13 million people and had faced 25-percent tariffs under Trump’s earlier measures. Germany, in particular, stands to benefit, as the tariff reduction from 27.5 to 15 percent is expected to stabilize its automotive supply chains.

However, a 15-percent tariff remains costly for industries such as pharmaceuticals and semiconductors, which had been under threat of 200-percent levies.

The EU also committed to $600 billion in additional US investments, reflecting a broader shift in transatlantic economic ties.

Mixed reactions across Europe

The agreement has sparked a wide range of responses across the EU:

France: Prime Minister François Bayrou denounced the deal as a "dark day" for Europe, calling it a form of “submission” to US economic pressure. His criticism highlights fears that the agreement undermines the EU’s autonomy.

Italy: Prime Minister Giorgia Meloni welcomed the deal, emphasizing that it had averted "potentially devastating" consequences of a trade war. Speaking from Ethiopia, she praised the agreement as a necessary step to preserve transatlantic stability.

Germany: Chancellor Friedrich Merz cautiously endorsed the deal, applauding it for preventing an escalation in trade tensions. However, he acknowledged that it fell short of providing sufficient relief for European industries.

Next steps

The agreement, described by von der Leyen as a “framework,” requires further refinement. EU member states will review the deal, and technical negotiations are expected to continue in the coming weeks.

One unresolved issue is the treatment of alcohol, with France and the Netherlands pushing for carve-outs for wine and beer, respectively. Details on the steel export mechanism also remain unclear.

Von der Leyen emphasized the need for unity, stating, “This agreement avoids a major crisis, but we still have work to do to ensure it serves all member states fairly.”

Broader context

The deal comes against the backdrop of heightened tensions since October 2023, when the US imposed additional tariffs on EU goods. The $1.9 trillion transatlantic trading relationship has been under strain, with fears of a full-blown trade war looming.

While the agreement has provided immediate relief, critics argue it cements higher costs for European businesses and reflects a growing power imbalance in transatlantic relations.