The United States and the European Union have unveiled the much-anticipated details of a trade agreement aimed at easing long-standing transatlantic trade tensions.
While the deal marks a significant step forward in reshaping bilateral economic relations, it notably retains high tariffs on European automobiles exported to the U.S.
A centrepiece of the agreement focuses on the automotive sector. The European Union has agreed to eliminate its 10% Most-Favoured-Nation (MFN) tariff on American-made passenger vehicles and light trucks, effectively reducing the tariff to zero.
This concession is expected to benefit U.S. automakers such as Ford and Tesla, boosting exports of popular models like the Ford Mustang and Tesla Model S.
In a reciprocal move, the United States will impose a 15% tariff on roughly 70% of European Union auto exports. This includes cars, auto parts, semiconductors, and pharmaceuticals originating from the EU. The continued high U.S. tariffs underscore persistent protectionist pressures and sensitivities within the American automotive industry.
Both the U.S. and EU have committed to zero-for-zero tariff removal on about €70 billion of bilateral trade in sectors including aircraft parts, certain chemicals, generic drugs, and semiconductor tools. Industry leaders have responded with cautious optimism.
Sigrid de Vries, Director General of the European Automobile Manufacturers’ Association (ACEA), welcomed the de-escalation of tensions but expressed concern over the retained high U.S. tariffs on vehicles and parts, calling for further reduction of barriers to strengthen transatlantic trade ties.
Beyond tariffs, the deal addresses several non-tariff issues. Tentative compromises have been made on regulatory alignment, including climate regulations, digital market rules, and supply chain matters.
The EU has agreed to delay the enforcement of its new deforestation regulation by one year to give global companies more time to comply. Similarly, enforcement of the EU’s Digital Markets Act on major U.S. tech platforms will be paused while structured negotiations continue.
Despite the progress, the lack of a tariff breakthrough on European automobiles highlights enduring political and economic divides between the two powers. Both sides aim to finalise remaining details amid looming deadlines and unresolved disputes.
Next steps include a U.S. Presidential proclamation expected by August 1, 2025, to adjust Section 232 and MFN duties; EU member states are slated to ratify zero tariffs by the end of the third quarter. A Joint Oversight Committee is set to convene in September 2025 to finalise quotas, origin rules, and sector-specific concerns.
