The United States and the European Union (EU) just announced some major, game-changing details about their upcoming trade framework. This announcement represents a real turning point for transatlantic economic relations. On July 27, 2025, U.S. President Donald Trump and then-European Commission President Ursula von der Leyen sealed the world’s largest free trade agreement. The agreement makes a big push toward strengthening economic connections through lower tariff rates on important products.
Central to the agreement is a conditional 15% tariff on European automobiles and auto parts imported into the U.S. This new rate is a significant drop from the 30% tariff that Trump first threatened. It almost cuts in half the current tariff rate on Europe’s auto sector, which was about 27.5%. Among other things, this move is widely seen as a positive sign to any European manufacturers who want to tap the lucrative U.S. market.
The new trade deal ends the controversial U.S. tariffs on automotive imports. It further commits that the U.S. will not go above Most Favoured Nation (MFN) duties on all other products imported from the EU, notably including pharmaceuticals. Starting September 1, tariffs on Europe’s pharmaceutical sector, which serves as the U.S.’s largest source of pharmaceutical imports, will be capped at up to 15%. This is a significant drop from Trump’s earlier threats to impose duties as high as 250 percent on drug-making goods.
The agreement covers a number of other Section 232 tariffs, which will be limited to the broader 15% rate. The tariffs cover a broad range of products, from lumber to semiconductors. These provisions have been the subject of intense battle during past trade negotiations.
The EU is taking an admirable leap with this agreement. They commit to buy $750 billion of U.S. energy products in the next few years. Just as ambitious is the EU’s promise to invest at least $600 billion into the U.S. economy. This bilateral decision reflects a robust shared commitment to promoting economic opportunity on both sides of the Atlantic.
The campaign Trade negotiations have come a long way, but the agreement is still missing strong updates to the EU’s digital services act. This law regulates the activities of big tech across the EU. Business, labor, environment, academics … everyone is looking very closely at this part of the trade deal. They fight too for a deeper digital policy overhaul.