U.S. President Donald Trump and EU President Ursula Von der Leyen met at one of Trump’s golf courses in Scotland on Monday morning (AEST) to negotiate the deal.
As part of the deal, the EU will also have to invest hundreds of billions of dollars into the U.S, on top of existing commitments.
Context
A tariff is a tax on imports. It is applied to foreign-made goods brought into another country, and paid by the importer.
For example: Country A and Country B make the same product. Country A wants its citizens to buy its own version of the product, not Country B’s, so it applies a tariff.
Importers in Country A now pay the tax when they bring in B’s product, and pass on the cost to consumers, making this version of the product more expensive to buy.
In April, Trump imposed global tariffs on all imports entering the U.S, including a 20% tariff on products from EU member countries.
The EU’s leadership can negotiate trade deals on behalf of its 27 members.
Following Trump’s announcement, the EU began negotiations with the U.S. Trump twice threatened to increase tariffs on the EU while negotiations were ongoing.
New trade deal
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Von der Leyen and Trump agreed to a single “15% tariff rate for the vast majority of EU exports” on Monday morning.
Both leaders also agreed to a tariff exemption for some products, including aircraft parts and natural resources.
As part of the trade deal, the EU will invest an additional $US600 billion ($AU915 billion) into the U.S.
The EU will also purchase $US750 billion ($AU1.14 trillion) worth of U.S. energy. Von der Leyen said the investment will “replace Russian gas and oil”. After Russia invaded Ukraine in 2022, the EU pledged to “end its dependency on Russian energy” and “diversify” Europe’s energy sources.
The EU is also required to make an as-yet undetermined investment into U.S. military equipment.
Steel and aluminium tariffs will remain at 50% globally with no exemptions for the EU.
Response
Following the meeting, Trump told reporters: “It’s great that we made a trade deal today instead of playing games and maybe not making a deal at all… It’s the biggest deal ever made”.
Von der Leyen called the deal a “breakthrough”, saying it “delivers stability and predictability… on both sides of the Atlantic.”
The Netherlands’ Prime Minister Dick Schoof said on X: “No tariffs would have been better, but this agreement provides more clarity for our businesses and brings more market stability.”
