The Wall Street Journal - Trump and EU Reach Tariff Deal, Avoiding Trade War Story by Kim Mackrael, Natalie Andrews • 18h • 5 min read Markets today (July 28, 2025)

 The Wall Street Journal 

Trump and EU Reach Tariff Deal, Avoiding Trade War

Story by Kim Mackrael, Natalie Andrews • 18h • 5 min read

Markets today  (July 28, 2025) 

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President Trump said he reached a trade agreement on Sunday with the European Union, avoiding a damaging trade war with the U.S.’s largest trading partner and marking his biggest deal so far in his attempt to remake the global trading system through higher tariffs for U.S. trading partners.

Trump said the U.S. would set a baseline tariff of 15% for European goods, including automobiles. He said the EU had agreed as part of the deal to buy $750 billion worth of energy products from the U.S. and invest an additional $600 billion in the U.S.

“I think it’s going to be great for both parties,” Trump said, following face-to-face talks Sunday with European Commission President Ursula von der Leyen in Trump’s golf resort in Turnberry, Scotland.

The European deal is the most consequential agreement Trump has so far announced. The EU is America’s biggest regional trading partner when the bloc’s 27 member states—which share a common trade policy—are considered together and its top source of foreign investment. The two sides exchange more than $5 billion worth of goods and services every day.

“Today’s deal creates certainty in uncertain times,” von der Leyen said. She said the 15% level would apply for “the vast majority of EU exports” including cars, semiconductors and pharmaceuticals. The 15% level “is the best we could get,” she said.

The terms disclosed on Sunday suggest that 15% is likely a new minimum tariff level for most American trading partners. Economists and trade analysts say that tariffs at that level will have an effect on companies’ decisions and are expected to contribute to higher prices for Americans, but won’t stop global trade flows.

“They are not at the level where the global economy burns down,” said Dmitry Grozoubinski, senior trade adviser at Aurora Macro Strategies.

The European deal comes after a flurry of recent trade announcements. Trump said this past week that he had reached a deal with Japan, another top U.S. trading partner, which put baseline tariffs at 15%. Separate agreements set Vietnam’s baseline tariff level at 20% and established a 19% rate for the Philippines and Indonesia, Trump has said.

The deal should ease anxieties that Trump’s drive could lead to a broader trade war and provide some clarity for business. Grozoubinski said a lot of disruption for businesses has been because of the unpredictability of the Trump administration’s trade policies. While most don’t want tariffs to rise at all, they would prefer a steady 15% tariff compared with a lower rate that is less predictable.

Neither side published the text of their agreement on Sunday. Although both presidents said that the EU’s baseline tariff would be 15%, they appeared to have different interpretations of some of the details.

Trump indicated in comments to the press that his global steel-and-aluminum tariffs, which are currently at 50%, would remain unchanged. Von der Leyen said the two had agreed to a quota system that would keep tariffs lower for some EU metals exports to the U.S.

Trump also said the EU had agreed “to open up their countries to trade at zero tariff.” Von der Leyen said the two had agreed to zero-for-zero tariffs for certain strategic products including aircrafts and their parts, certain chemicals, semiconductor equipment and certain agricultural products, among others, and said the two sides would work to add more products to that list.

She said the EU would give U.S. companies better access to the bloc’s market. The deal provides a framework to further lower tariffs on more products, address non-tariff barriers and cooperate on economic security, von der Leyen said.

“We have the opening up of all of the European countries which I think I could say were essentially closed,” Trump said.

Details on Trump’s other trade deals have also been scant. The administration has released no documentation for deals it claims to have reached with the Philippines or Japan, and details released of the Indonesia deal last week remain incomplete. The U.K.’s framework, released in May, also left some big items unresolved, like steel tariff levels.

Trump had earlier put a 10% baseline tariff on most EU goods that are exported to the U.S., as well as a 25% tariff on its auto industry and a 50% tariff for steel and aluminum. But he had threatened to impose 30% tariffs on the bloc if a deal wasn’t reached by Aug. 1, a level that European officials have suggested could effectively shut down some trade flows.

The U.K. has the lowest tariffs Trump has so far agreed to as part of a deal, at 10%. Trump was also expected to iron out final details of the U.K. agreement in meetings with British Prime Minister Keir Starmer on Monday.

Analysts said financial markets would welcome the deal. The EU in recent days had finalized plans for retaliatory tariffs that could have been used to hit more than $100 billion in U.S. imports if trade talks broke down.

Some of the biggest outstanding talks are with Mexico, Canada and China, the second largest economy in the world. U.S. and Chinese officials are set to meet in Stockholm on Monday and Tuesday, where the two sides are expected to discuss extending their trade truce beyond its current Aug. 12 expiration date.

Both sides have pulled back on the highest tariffs they had applied to each others’ goods earlier this year, although U.S. levies on China remain higher than they were before Trump took office.

An EU deal with 15% baseline tariffs is likely to be welcomed by financial markets because it would avert the risk of an escalating trade fight, Capital Economics economist Andrew Kenningham said recently. Tariffs at that level would lower the EU’s gross domestic product by about 0.3%, he said, with Germany being hit harder while France and Spain would be less affected.

Those tariffs would damp German auto exports, but are unlikely to be a “knockout blow to the sector,” Kenningham said.

European officials expect that the 15% baseline tariff will keep average levies at a similar level to what they are currently because they wouldn’t be cumulative with duties that existed before Trump’s return to office earlier this year. The EU has said it is already facing an effective average tariff rate that is close to 15% because Trump’s 10% baseline tariff was stacked on top of the U.S.’s pre-existing tariffs.

European officials were prepared for a difficult negotiating session on Sunday. The EU’s trade commissioner, Maroš Šefčovič sought advice from Japanese officials on Saturday to get a better sense of what to expect, a person familiar with the matter said. He learned that those discussions—which lasted more than an hour—went beyond surface level talks and delved into the details of the agreement.

The Europeans hunkered down in a hotel in Glasgow on Sunday to discuss what kind of messaging would be most effective during the meeting with Trump, a person familiar with their preparations said.

Von der Leyen brought several of her top trade and political officials into the meeting with her, including Šefčovič. Trump was accompanied in Scotland by Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer, among others.

When asked what his next focus would be on trade deals, Trump turned the focus back to the European deal. “This is the biggest of them all,” he said.

Write to Kim Mackrael at kim.mackrael@wsj.com and Natalie Andrews at natalie.andrews@wsj.com