The US and the EU have agreed on a new framework on reciprocal, fair, and balanced trade, marking a significant step toward strengthening one of the world’s largest economic partnerships. The US-EU trade agreement aims to expand market access, cut tariffs, and drive massive investments in energy, technology, and defense, while ensuring fair competition and secure supply chains, according to a joint statement issued by the two sides.
Strategic importance
The US-EU economic relationship already supports $5 trillion in mutual investments. This new framework reinforces both sides’ commitment to strengthening supply chain resilience, boosting green and digital transitions and securing transatlantic economic security against non-market practices.
Key elements of the US-EU trade agreement
1. Tariff reductions and market access
EU has committed to eliminate tariffs on all US industrial goods, while the US has committed to apply the higher of either the MFN (Most Favored Nation) tariff rate or 15 percent tariff on EU-origin goods.
2. Section 232 tariffs and automobiles
US tariffs on pharmaceuticals, semiconductors, and lumber are capped at 15 percent. No Section 232 automobile or automobile parts tariffs will apply to EU goods covered with an MFN tariff of 15 percent or higher.
3. Steel, aluminum and market overcapacity
The US will impose a 15 percent import tariff on most EU products but 50 percent on EU steel, aluminum and their derivatives with the intention to consider working towards a TRQ for EU exports and ring-fencing against global steel and aluminum overcapacity.
According to the European Steel Association (EUROFER), a 15 percent tariff on all products means an additional huge burden on steel, as many EU exports are steel-intensive, such as machinery and vehicles. Commenting on the deal, Axel Eggert, director general of EUROFER, said, “The text remains vague, but we recognize the efforts undertaken by Commission President von der Leyen and Trade Commissioner Šefčovič to find a joint US-EU initiative on steel, aluminum and their derivatives. Work must start immediately to get back to preferential access for traditional EU steel volumes to the US as no deadline is set. Ring-fencing against global steel overcapacity means close alignment of the EU's and the US' import regimes. With the proposal in September for a new, highly effective trade measure replacing the EU steel safeguards, the Commission must now prove that they are willing to take bold action that aligns the objective of the EU Steel Action Plan to promote and protect domestic steel capacity and the objectives of the deal with the US.”
4. Energy and technology
- The EU intends to procure US liquified natural gas, oil, and nuclear energy products with an expected offtake valued at $750 billion through 2028.
- In addition, the EU intends to purchase at least $40 billion worth of US AI chips for its computing centers.
5. Investment and defense