US-EU Trade Pact: From Automobiles to Microchips, What Could Become More Expensive After 15% Duty?
Import duties on European goods could hike prices for American shoppers and impact revenues for European firms exporting to the U.S.
U.S. President Donald Trump and European Commission President Ursula von der Leyen were seen shaking hands following the finalization of a trade agreement at Trump’s Turnberry golf course in Scotland.
On Monday, President Donald J. Trump revealed a newly signed trade pact with the European Union, aiming to fundamentally alter the economic dynamics between the globe’s two largest economic powerhouses.
“The United States and European Union have signed a Cooperation Agreement on Reciprocal, Equitable, and Balanced Trade. Under this deal, the EU will procure $750 billion worth of U.S. energy exports and will inject $600 billion in fresh investment into the U.S. by 2028,” stated a White House press release.
These new import duties — essentially taxes imposed when Americans buy European goods — could raise the final cost of such items in the U.S. market and negatively impact the earnings of European exporters and their U.S. distribution partners.
What Does the US-EU Trade Deal Involve?
As per the agreement, the European Union will pay a 15% duty to export items into the U.S., including cars, auto components, pharmaceuticals, and semiconductors. This rate is less than the originally proposed 20% and far below the 30% to 50% duties previously floated by Trump.
The new tariff rules cover about 70% of all European exports, with the remaining 30% still subject to ongoing negotiations.
However, sector-specific duties on steel, aluminium, and copper will stay unchanged — the EU will continue to pay 50% on these, as both sides continue talks on enhancing supply chain security for these key industrial materials.
According to the White House, this accord is projected to benefit U.S. farmers, manufacturers, fishermen, and ranchers by expanding exports and helping cut down the existing trade imbalance with the EU. In return, the EU has agreed to remove multiple import duties — including eliminating all tariffs on U.S. industrial goods sold to Europe.
While a joint communiqué will soon be made public, the finer details of the agreement are still under discussion.
Breaking Down the New Tariffs
Though the 15% duty replaces Trump’s earlier 30% threat, the new deal effectively raises the average tariff on European goods from 1.2% in the previous year to 17%, potentially shrinking the EU’s GDP by 0.5%, according to Jack Allen-Reynolds, deputy chief economist for the Eurozone at Capital Economics.
This increase in tariffs means European sellers may have to choose between increasing prices for U.S. buyers (and risking decreased demand), or absorbing the cost themselves — which would lead to reduced profit margins. The overall result could be reduced export revenue for Europe and a sluggish economic outlook.
For American consumers, this may mean higher costs on European vehicles, computer chips, and medications.
Other Key Provisions of the US-EU Pact
- The European Union will funnel $600 billion in investments into the U.S. throughout Trump’s term, in addition to the existing annual $100 billion investments by EU firms.
- The EU has committed to purchasing $750 billion in U.S. energy by 2028, reinforcing America’s position as a global energy leader.
- The two sides will collaborate to remove tariffs in certain industries and offer larger quotas on other goods, unlocking significant new trade opportunities and helping protect U.S. jobs.
- The agreement includes commitments to tackle non-tariff obstacles affecting trade in agriculture and food — such as simplifying the paperwork required for U.S. pork and dairy exports.
- Both sides will craft strong “rules of origin” to ensure that the advantages of the trade deal go only to U.S. and EU producers, and not to third-party nations.
- The U.S. and EU also pledged to combat unwarranted digital trade restrictions and strengthen cooperation in supply chain resilience and technological innovation.
- The EU has also agreed to acquire substantial quantities of U.S. defense equipment, indicating deeper military-commercial alignment.
