US and EU Reach Framework Agreement on Trade Tariffs

According to reports, the United States and the European Union reached a framework agreement on July 27, which imposes a 15% tariff on most goods exported from the EU to the US, successfully avoiding a trade war that could have severely impacted the global economy. The trade volume between the US and EU represents nearly one-third of global trade. After a meeting between President Trump and EU Commission President Ursula von der Leyen, it was announced that a baseline tariff of 15% would apply to nearly all EU goods exported to the US, including automobiles. Notably, the 15% rate is the maximum and will not be added on top of any existing tariffs. von der Leyen stated that the tariff would cover all products, although Trump later clarified that it does not include pharmaceuticals and metals. This marked the end of months of tense negotiations between the EU and the US. von der Leyen emphasized that this is a significant trade agreement between the two major global economies, bringing stability and predictability. Meanwhile, tariffs on EU steel and aluminum will remain at 50%, but von der Leyen indicated that they would gradually be reduced and replaced with a quota system. She also pointed out that although the framework agreement had been signed, the US would announce the results of the Section 232 trade investigation into semiconductors and pharmaceuticals within two weeks and would decide on the tariff rates for these products separately. However, she stressed that any future tariff decisions by the US regarding chips and pharmaceuticals would be independent of the current agreement. Additionally, under the trade agreement, the EU committed to purchasing $250 billion worth of US energy (including LNG, oil, and nuclear fuel) annually over three years, totaling $750 billion, to replace Russian gas supplies. They also agreed to increase investments in the US by $600 billion and fully open member states' markets to the US, implementing zero tariffs on industrial goods, and making large-scale purchases of US military equipment. This statement comes just days before the August 1 deadline, when Trump threatened to impose high tariffs on EU goods. Trump's main concern is the US trade deficit with the EU, which reached $235 billion in 2024 according to the US Census Bureau. The EU noted that the US surplus in service trade with the EU has somewhat balanced the trade relationship. In May of this year, Trump threatened to impose a 50% tariff on almost all EU goods to pressure the EU and accelerate negotiations; later, the rate was reduced to 30%. Although the 15% baseline tariff is better than the previously threatened 30% punitive rate, many Europeans feel this outcome still falls short of the EU's initial goal of achieving a zero-for-zero tariff agreement. However, the US and EU will implement zero tariffs on certain products, including all aircraft and their parts, some chemicals, certain generic medicines, semiconductor manufacturing equipment, and some agricultural products and critical raw materials. More products will be added to this list, while the tariff on spirits remains to be determined. Trump seeks to reshape the global economic order and reduce the US trade deficit that has persisted for decades. Although the Trump administration has not fulfilled its promise of '90 agreements in 90 days,' it has reached trade agreements with the UK, Japan, Indonesia, and Vietnam. On July 27, Trump also claimed that tariffs are bringing hundreds of billions of dollars in revenue to the US.