Trump and the E.U. Have a Blueprint for a Giant Trade Deal. Is it Good for Europe?

New York Times

28-07-2025

President Trump and Ursula von der Leyen, the president of the European Commission, clearly agreed on one thing as they announced the outlines of a trade deal between their two massive economies. It would be huge.
Ms. von der Leyen had emphasized the potential scale during negotiations, and she reiterated it after the two sides announced an agreement Sunday, calling it 'the biggest trade deal ever.'
Mr. Trump picked up that talking point and ran with it. 'This is the biggest of them all,' he said.
For a president who often fixates on superlatives, the new pact offered an attractive talking point. The United States and the 27-nation bloc have the largest economic relationship in the world by many measures, trading nearly $2 trillion in goods and services per year. But while that may have helped Ms. von der Leyen to get an agreement over the finish line — despite Mr. Trump's longstanding skepticism toward Europe — a giant deal is not necessarily a good deal for Europe.
Many European companies will be worse off. About 70 percent of European products will now face a 15 percent tariff when they enter the United States, according to senior European Commission officials who spoke on condition of anonymity to discuss the details of the package before it is finalized. That would be a major increase in charges. Since consumers often pay for higher tariffs, American shoppers are likely to shoulder at least some of that additional cost.
It's also likely that American companies stand to benefit from other parts of the agreement — including the European Union's promise to spend more on U.S. energy products and defense equipment.
But much is uncertain, and reactions in Europe were sharply divided. Chancellor Friedrich Merz of Germany and some business groups offered statements of cautious support, voicing hope that the agreement would prevent an escalation in pain and uncertainty.
Others were more critical. François Bayrou, France's prime minister, said on social media that it was a 'dark day' for Europe.
'My initial assessment: Not satisfactory,' Bernd Lange, a member of the European Parliament from Germany, wrote on social media. 'This is a lopsided deal.'
Is a 15 percent tariff a good outcome for the E.U.?
American tariffs on European Union goods were previously in the low single-digits on average. And just a few weeks ago, the bloc hoped to negotiate a 10 percent across-the-board rate.
Given that, a 15 percent tariff on goods from the European Union marks a notable step up.
Still, the rate would be in line with what other American trading partners, including Japan, have agreed. It is also much lower than the 30 percent tariffs that Mr. Trump had threatened to impose on the bloc starting on Aug. 1.
'When you prepare for a hurricane, somehow the storm feels like a relief. That is how the deal currently feels,' said Carsten Brzeski, the global head of macroeconomics for ING Research.
Mr. Brzeski added that the outlined agreement could be seen as 'damage control.'
One sector that will welcome the deal is the car industry. The 15 percent rate is higher than the 2.5 percent that was in place before 2025. But it would significantly lower the tariff that European carmakers, including Volkswagen and BMW, have faced since Mr. Trump imposed a 25 percent levy on foreign-made cars and car parts in April. European companies, which sent vehicles worth 38.5 billion euros ($45 billion) to the United States last year, have been suffering from the uncertainty caused by Mr. Trump's tariffs and threats.
The impact on the E.U.'s top export is less certain.
Pharmaceuticals are the European Union's most important export to the United States, and it remains unclear how tariffs will apply to them. The United States is still working on an investigation into the pharmaceutical industry globally that could result in higher tariffs on medicine.
The senior European Commission officials on Monday suggested that their understanding is that pharmaceutical products will be set at zero for the time being, and will not be subjected to tariffs higher than 15 percent once the investigation concludes. Ms. von der Leyen had established that as a hard line.
But that is a political agreement, not yet a legally binding one, the officials acknowledged.
Ms. von der Leyen herself said Sunday that 'how to deal with pharmaceuticals in general, globally, that's on a different sheet of paper.'
Many details are not finalized, and exceptions will be key.
Ms. von der Leyen said a range of products would not face tariffs on either side of the Atlantic. The list included airplanes, some generic drugs, some agricultural products, and critical raw minerals.
On some other farm goods, Europe is expected to expand how much can be imported from the United States without facing tariffs.
But the senior European Commission officials on Monday said that a list of specific products — which is expected to include items like lobsters, frozen seafood and pet food — will be published only when a paper outline of the framework agreement is released. That is still in the works and could come in the coming days.
And additional European exports could still face lower tariff rates. Ms. von der Leyen said that it had not yet been decided whether wine and spirits would be exempt, for instance.
Ms. von der Leyen also indicated that negotiations were ongoing when it comes to steel and aluminum products, which Mr. Trump said would remain subject to a 50 percent tariff rate.
Steel and aluminum products are expected to fall under a new quota system, the European Commission officials said. The system would set lower tariffs on metal products sent to the United States up to the current volume of annual exports. Only steel and aluminum in excess of those historical amounts would face higher tariff rates.
But the details are not yet finalized.
How quickly those negotiations will occur — and how extensive exemptions will be — remains to be seen.
How big are the E.U.'s purchase plans?
Mr. Trump also talked up the investments in the United States that E.U. officials had promised as part of the deal. The bloc has agreed to buy $750 billion worth of American energy, he said. Mr. Trump added that its 27 member states will also invest $600 billion more in the United States.
Those are big headline numbers, even if they will be spread out over time. Ms. von der Leyen said that the energy purchases will occur over three years. In other words, $250 billion would be spent for each remaining year of Mr. Trump's presidential term. That would amount to a substantial chunk of Europe's energy spending.
For context, the European Union imported 375.9 billion euros ($442 billion) worth of liquefied natural gas, petroleum, and natural gas products in 2024. The new commitment would also include nuclear-related investments, which are not included in that figure.
But when it comes to both energy purchases and the broader investment pledges, spending would come from European member states. Such purchases are typically not something that the European Union as a bloc has power over. Given that, it is not clear how binding those pledges would be — or even how they would be tracked.
With so many uncertainties, business groups were hesitant to give the package an immediate endorsement.
'We still need to examine the details and hope that a solution is soon found for important sectors that appear to be excluded from the deal,' Fredrik Persson, president of BusinessEurope, a lobby group that represents European companies, said in a statement.