The agreement imposes 15% tariffs on most EU goods like cars and pharmaceuticals, but exempts strategic sectors such as aircraft and semiconductors from tariffs entirely.
In exchange, the EU committed to US$600 billion in US investments and US$750 billion in American energy purchases, plus substantial military equipment procurement.
Markets reacted positively to the deal that averted a trade war scheduled to escalate on 1st August, with Bitcoin and major cryptocurrencies rising alongside equity markets.
The US and Europe have just avoided a full-on trade war. While also playing golf in Scotland, US President Donald Trump met with European Commission President Ursula von der Leyen to announce they had made a huge step forward in their tariff negotiations. Trump even called it the “biggest deal ever reached”.
The deal imposes a 15% tariff on most EU goods including cars, semiconductors and pharmaceuticals, which represents a reduction from previously threatened levels. However, strategic sectors such as aircraft, certain chemicals, generic drugs, and semiconductor equipment will benefit from a zero-for-zero arrangement that exempts them from tariffs on both sides, while steel and aluminium tariffs remain unchanged at 50%.
In exchange for these trade terms, the EU has committed to substantial economic investments, including US$600 billion (AU$914 billion) in US projects and companies and US$750 billion (AU$1.14 trillion) in purchases of US energy products like oil, gas, and others, over the coming years.
The EU will also procure substantial amounts of US military equipment, though the exact volume hasn’t been formally disclosed.
This agreement successfully prevented a looming trade war that was set to escalate on August 1st when higher tariffs would have taken effect.
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Markets, Leaders React Mainly Positively to Deal
While European business leaders have welcomed the stability this deal provides, some have criticised it as favouring US interests more than European ones.
According to reporting by CNN, Joe Brusuelas, chief economist at RSM said:
You’re going to pay more for your European imports. That’s what this means. This doesn’t enhance trade, this just sets a tax on European goods in the United States.
Joe Brusuelas, RSM Maury Obstfeld, senior fellow at the Peterson Institute for International Economics, commented that the deal did not offer anything new in essence and doesn’t remove any EU non-tariff barriers – such as value-added and digital taxes, which Trump has complained about a lot.
Markets have so far reacted mostly positively to the announcement, with equity markets moving higher and most crypto assets following that trend. Bitcoin is up just over one percent at the time of writing and trading at US$119,338 (AU$182,238).
Meanwhile Ethereum, XRP and Solana are all up roughly by 3% over the past 24 hours, as the total crypto market cap stands at US$3.94 trillion (AU$6 trillion).
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