US and EU reach tariff agreement to avert trade war

The US and EU have struck a tariff deal that will avert a transatlantic trade war between the two sides but still impose American tariffs of 15 per cent on most imports from the bloc.

As part of the deal the EU has agreed to spend hundreds of billions of dollars on US energy products and weapons, and accepted a broad 15 per cent levy that covers many key European exports, including cars.

The agreement was struck following a meeting on Sunday between US President Donald Trump and European Commission President Ursula von der Leyen at his Turnberry golf resort in Scotland.

The deal marks a victory for Trump, who has spent months forcing America’s trading partners into bruising negotiations by threatening steep tariffs, although the terms are in line with what Brussels had told EU member states to prepare for.

European stocks opened at a four-month high on Monday, with the Stoxx Europe 600 rising 1 per cent.

“This is probably the biggest deal ever reached in any capacity, trade or beyond trade,” Trump said as he announced the agreement.

“Today’s deal creates certainty in uncertain times . . . for citizens and businesses on both sides of the Atlantic,” von der Leyen said, adding that the 15 per cent US tariff would apply to European cars, pharmaceuticals and semiconductors — important products for Brussels.

A senior US official later confirmed that European exports of automobiles, pharmaceuticals and semiconductors to the US would all be subject to the 15 per cent tariff.

However, Trump said US levies on steel and aluminium, which he has set at 50 per cent on many countries across the world, would not be cut to 15 per cent for EU products — dashing the hopes of industry in the bloc for an early and low tariff quota.

He said the US would put tariffs of 15 per cent on EU goods, including automobiles, in exchange for the bloc “opening up their countries at zero tariff” to American exports.

He had threatened to impose 30 per cent tariffs on the EU if no deal had been struck by August 1.

Trump said the EU would spend an additional $750bn on US energy products, invest $600bn in America and buy “a vast amount” of his country’s military equipment worth “hundreds of billions of dollars” as part of the deal.

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Von der Leyen confirmed the EU would seek to buy $250bn of US energy products each year for the next three years.

“With this deal we are securing access to our largest export market,” she said, while acknowledging that the 15 per cent US tariff would be “a challenge for some” European industries.

German Chancellor Friedrich Merz saluted the agreement as “avoiding an unnecessary escalation in transatlantic trade relations”.

He said a trade war “would have hit Germany’s export-oriented economy hard”, highlighting how the German automotive industry would now see US tariffs cut from 27.5 per cent to 15 per cent.

However, Wolfgang Niedermark, board member of the Federation of German Industries trade body, called the agreement “an inadequate compromise”, with the EU “accepting painful tariffs”.

A 15 per cent US tariff rate “will have a huge negative impact on Germany’s export-oriented industry”, he said.

Italy’s Prime Minister Giorgia Meloni, who had urged restraint to avert an escalatory trade war, welcomed the deal.

Meloni’s office said Brussels and EU member states had worked together to “avoid the trap of those who called for fuelling a head-on clash between the two sides of the Atlantic”. 

French EU affairs minister Benjamin Haddad said on Monday that the deal would bring “temporary stability” and exempted key French sectors from tariffs, but called it “unbalanced”.

“The current situation is not satisfactory and cannot be sustainable,” he said in a post on X.

The European Round Table for Industry, which represents chairs and chief executives of European industrial and technology companies, expressed cautious support for the deal.

It said it “expects that satisfactory agreements will be swiftly achieved in important sectors not yet included in the . . . deal”.

Ahead of the negotiations at Turnberry, which lasted around an hour, Trump had said the US-EU trade relationship was “unfair to the United States . . . a one-sided relationship”.

Von der Leyen had agreed that the EU’s trade surplus in goods with the US, which hit almost €200bn last year, needed to be cut. “We have to rebalance it,” she said.

Some US trading partners have expressed concern that, even when they strike agreements with Trump to lower his tariffs, they face uncertainty over future American levies.

This reflects how Trump’s administration has launched probes into industries including aerospace, pharmaceuticals and semiconductors that could result in new tariffs.

A senior US official said it was “likely” that no US tariffs would be imposed on European aerospace exports to America once the administration had concluded its investigation into the sector.

Additional reporting by Anne-Sylvaine Chassany in Berlin and Amy Kazmin in Rome