EU, US Chart Next Steps on Trade Pact

The US and European Union took the next steps to formalize their trade pact, detailing plans that could reduce tariffs on European automobiles within weeks while opening the door to new potential discounts for steel and aluminum.

The joint statement issued Thursday advances the preliminary deal announced a month ago, by including specific benchmarks for the EU to secure its promised sectoral tariff discounts on cars, pharmaceuticals and semiconductors, as well as new commitments to cooperate on economic security matters, food standards and digital trade.

President Donald Trump has repeatedly praised the sweeping US-EU trade framework, extolling it as “a big deal” in a Monday White House meeting with foreign leaders including European Commission President Ursula von der Leyen. 

The deal provides predictability and “delivers for our citizens & companies, and strengthens transatlantic relations,” von der Leyen said in a post on the social-media platform X.

The development underscores the nature of trade talks under Trump, with some initial, broad pronouncements of deals giving way to weeks – or more – of work to hammer out detailed agreements. Many of them are also tied to sweeping policy changes that could take time to materialize.

For example, Trump already imposed a flat 15 percent rate on most European goods – half the 30 percent he’d previously threatened. But the US promise to extend that lower levy to autos and auto parts now hinges on the EU formally introducing a legislative proposal to eliminate a host of its own tariffs on US industrial goods and provide “preferential market access” for some US seafood and agricultural products.

Car Relief

The statement outlines choreographed action on both sides of the Atlantic, with the US codifying reduced auto tariffs once the EU “formally introduces the necessary legislative proposal to enact” its own promised tariff reductions. The discounted 15 percent tariffs on European auto imports – down from the current 27.5 percent – would be effective from the start of the same month that legislation is advanced. 

They could be in place within weeks, said a senior Trump administration official who briefed reporters on the initiative. The shift has been anxiously anticipated by some EU member states, particularly Germany, which exported $34.9 billion of new cars and auto parts to the US in 2024.

The legislative trigger is designed to help ensure the EU delivers on its promised tariff reductions – and ensure the 27-nation bloc has sufficient pressure to obtain the political mandate needed to make the changes, the administration official said.  

The US is committing to apply lower most-favored-nation, or MFN, tariffs to a slew of other European products – including aircraft and aircraft parts, generic pharmaceuticals and their ingredients and some natural resources such as cork. 

More carve-outs could be added in future, the statement says, but for now the EU has not succeeded in receiving the same treatment for wines, spirits and medical devices. The US is also renewing its commitment to cap future sectoral tariffs on European pharmaceutical products, semiconductors and lumber at 15 percent. 

Metals Quotas

It’s also opening the prospect for discounted rates on some steel, aluminum and derivative products under a quota system. That’s a shift from the White House’s stated plans in July, when the Trump administration insisted those metal tariffs would remain at 50 percent, helping to lower trade deficits with the EU and bring revenue to US coffers. 

On steel and aluminum, the EU and US now assert they “intend to consider the possibility to cooperate on ring-fencing their respective domestic markets from overcapacity, while ensuring secure supply chains between each other,” according to the joint statement. 

Under the terms agreed by the two sides, the EU faces a 15 percent tariff on most of its exports. The US clarified in an executive order last month that the EU’s rate would function as a ceiling, while other exporters’ universal duty is currently in addition to existing MFN duties. Goods covered by the order that faced MFN levies above 15 percent will continue to do so, but separate sectoral tariffs do not stack on top of each other or on top of the universal rates, said some of the people.

The document leaves unanswered major questions about how the EU might fulfill its promise to invest $600 billion in the US or purchase some $750 billion in US energy resources – including liquefied natural gas, oil and nuclear power products – through 2028.

Private sector investments by European companies would be expected across strategic sectors in the US, including pharmaceuticals, semiconductors and advanced manufacturing, the senior administration official said.

Meanwhile, the EU plans to substantially increase procurement of military and defense equipment from the US, according to the statement, and intends to buy at least $40 billion worth of US artificial intelligence chips.

According to the joint statement, the EU intends to provide preferential market access for a range of seafood and non-sensitive agricultural goods imported from the US, including tree nuts, certain dairy products, fresh and processed fruits and vegetables, processed foods, planting seeds, soybean oil, pork and bison meat.

Digital Trade

In recent weeks, deliberations over the EU’s digital services regulations and potential relief for some goods – including wine and spirits – were seen prolonging talks. The EU didn’t secure lower rates for alcohol in the joint statement.

The US and EU are pledging to address some of what the joint statement calls “unjustified digital trade barriers,” with the bloc confirming that it will “not adopt or maintain network usage fees.”

A question-and-answer paper released Thursday by Brussels said it made no commitment on digital services regulation. “The Joint Statement does not include any commitment on EU digital regulations,” it said.

The EU has committed to work toward providing more “flexibilities” in its levy on carbon-intensive imports set to kick in next year, the statement said, and it will seek to ensure its corporate sustainability due diligence and reporting requirements don’t pose “undue restrictions on transatlantic trade.” 

Potential changes could include eased compliance requirements for small- and medium-sized businesses, according to the statement.