After weeks of tense negotiations between their top trade officials, the European Union and US have finally struck a framework deal – and it comes on the eve of America’s latest round of tariff talks with China.
Ultimately it took leaders from Washington and Brussels to sit down face to face to reach Sunday’s agreement.
That’s something we’ve also seen with the other deals that President Donald Trump has struck – his personal involvement is what has pushed them over the line – even when the prospects of a breakthrough did not seem bright.
The deal matters to both sides because so many businesses and jobs depend on what the EU calls “the world’s largest bilateral trade and investment relationship”.
The Trump administration is celebrating this as a big win and in many ways it is. But it is also not a total defeat for European Commission President Ursula von der Leyen.
“The entire European press is singing the president’s praises right now, amazed at the deal he negotiated on behalf of Americans,” Vice President JD Vance said in a post on social media site X.
“Tomorrow the American media will undoubtedly run headlines like ‘Donald Trump Only Got 99.9 Percent of What He Asked For’,” he added.
The consolation for the EU is that it now faces a 15% US tariff, rather than the 30% that had been threatened.
But it is still a major climbdown as the rate is a lot higher than before Trump’s so-called Liberation Day in April and not as good as the UK’s 10% rate.
Brussels can point to the fact that the lower rate applies to many major European exports.
It also means EU carmakers will face a 15% US import tax, rather than the 25% global tariff that was introduced in April.
But in return the EU is “opening up their countries at zero tariff” to American exports, Trump said.
EU steel and aluminium will also continue to face a 50% tariff when sold into the US.
For Trump, still feeling the glow from last week’s tariffs deal with Japan, the announcement marks another major victory.
The EU deal brings with it the expectation of roughly $90bn (£67bn) of tariff revenue for US government coffers – based on last year’s trade figures.
As part of the agreement the EU will also buy US energy products and arms worth hundreds of billions of dollars.
Trump said the EU would boost its investment in the US by $600bn, including American military equipment, and spend $750bn on energy.
The deal is being sold as a landmark moment in relations between Washington and Brussels.
It’s not been easy getting to this point.
Both sides played hardball but neither wanted negotiations to go beyond the 1 August deadline.
The bloc has spent weeks trying to present itself as a tough negotiator as it prepared retaliatory tariffs and warned it could follow through on them.
For years, the US president has railed against what he regards as Europe’s unfair trade practices.
The first part of that is the deficit. Last year that meant the US bought $236bn of goods more from the EU than it sold to the bloc.
Trump takes the somewhat simplified view that this is American wealth needlessly leaving the country. The reality is that international trade is a more complex affair.
The other complaint has been that the EU’s strict regulations on everything from cars to chickens make it harder for American companies to sell their products in the EU than the other way round.
European Commission President Ursula von der Leyen acknowledged the need to tackle the deficit.
In announcing the agreement, she said: “We have to rebalance it. We have an excellent trade relation.
“It’s a huge volume of trade that we have together. So we will make it more sustainable.”
Going into the talks the EU’s bargaining position faced major challenges.
Running the risk of a trade war with the world’s biggest economy did not come at an ideal time.
Europe’s economic growth has been sluggish and just last week the European Central Bank warned that “the environment remains exceptionally uncertain, especially because of trade disputes.” This deal removes some of that uncertainty.
Europe is also heavily reliant on the US for its security. In the back of the minds of the Brussels negotiating team would have been concerns that Trump could potentially stop arms supplies to Ukraine, pull the American military out of the region or even leave Nato.
“The EU was in a weak position, I’m afraid. It had no choice. Trump was not going to back down and it settled for 15%, so it’s a bad day for international trade, frankly. But it could have been worse,” former EU trade negotiator, John Clarke, told the .
This deal shows how serious President Trump is about renegotiating how the US, the world’s biggest economy, does business with everyone else.
Given the EU consists of 27 very different countries, it has seemed one of the trickier trade agreements to pull off.
It comes days after the US struck another major agreement with Japan – there have also been deals with the UK, Vietnam and Indonesia.
The other big ones still on the table are with the three biggest individual US trade partners – Mexico, Canada and China.
With the US president in a deal-making mood, there could be more positive news for the global economy over the next 48 hours.
For the third time in as many months, the US and China are holding trade talks.
Expectations are growing that higher tariffs between the world’s two biggest economies could be suspended for another 90 days.
But China has so far taken a tougher approach than other US trade partners.
If talks between the world’s two biggest economies falter, global trade could still face disruptions in the months ahead.
