The US and EU release a bare-bones account of their trade deal, but it's
a work in progress
[August 22, 2025] By
SAM McNEIL, DAVID McHUGH and FATIMA HUSSEIN
BRUSSELS (AP) — American and European Union officials released a
bare-bones account Thursday of their trade deal that imposes a 15%
import tax on 70% of European goods exported to the United States, but
they left blank key areas such as wine and spirits as well as steel and
indicated that talks would continue on those and a slew of other
important sectors.
The two sides said the document was only “a first step in a process that
can be further expanded to cover additional areas.” They are dealing
with the vast range of goods traded between the two economies in what is
the largest bilateral trading relationship in the world, involving $2
trillion in annual trans-Atlantic business.
The 3 1/2-page text represents a political commitment and is not legally
binding. It contrasts with the typical format for trade agreements,
which can be hundreds of pages long and carry legal force.
The key provisions are the 15% tariff on most EU goods, a zero rate on
U.S. cars and other industrial goods exported to the 27-member EU, and a
range of exceptions to the 15% rate for aircraft and aircraft parts,
generic pharmaceuticals and pharmaceutical ingredients, with other
sectors to be added for goods crucial to each other’s economies. Those
goods would face lower tariffs from before President Donald Trump’s
tariff onslaught.
“The EU has agreed to open its $20 Trillion market,” Trump's commerce
secretary, Howard Lutnick, said on X. “The second largest in the world
behind the great USA.”
He said the deal was “a major win for American workers, US industries,
and our national security. Tariffs should be one of America's favorite
words.”
European officials have had to defend the deal against dismay from
businesses and member governments at the higher tariffs and criticism
that the EU gave away too much. European Commission President Ursula von
der Leyen sold the deal as granting quick relief from the even higher
U.S. tariff on EU cars of 27.5% and as opening the way for further
negotiations that could exclude more goods from the 15% tariffs. The
deal provides that the lower tariff on cars would apply retroactively
from Aug. 1 if the EU can introduce legislation to implement its part of
the deal by then, which EU officials say they will do.
“Faced with a challenging situation, we have delivered for our member
states and industry and restored clarity and coherence to transatlantic
trade,” von der Leyen said. “This is not the end of the process.”
The chief EU trade negotiator, Maros Sefcovic, echoed those sentiments.
"The alternative was a trade war with sky high tariffs ... it builds
confidence. It brings stability,” he said.
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European Commissioner for Trade and Economic Security, Maros
Sefcovic, speaks during a media conference at EU headquarters in
Brussels, Belgium, Thursday, Aug. 21, 2025. (AP Photo/Virginia Mayo)
 Economists say higher tariffs slow
economic growth and will be reflected in higher consumer prices.
One category of goods not excluded from tariffs on
EU goods was wine and spirits, which had enjoyed zero tariffs on
both ends since a 1997 trade deal. Sefcovic, said EU officials had
not won an exemption “yet” but hoped to in future talks and that
“doors are not closed forever” on that issue.
That means American distillers face zero tariffs in Europe the short
term, but also the possibility of EU retaliation down the line, said
Chris Swonger, president and CEO of the Distilled Spirits Council of
the United States. “Without a permanent return to zero-for-zero
tariffs on spirits, American distillers do not have the certainty to
plan for future export and job growth without the fear of
retaliatory tariffs returning,” Swonger said in a statement.
The EU has suspended retaliatory tariffs on US goods including wine
and spirits until Feb. 5, 2026.
Proposals to exempt a certain amount of EU steel imports, known as a
tariff rate quota, have been left unresolved pending more talks.
The 15% tariff is much higher than tariff levels on both sides from
before Trump began imposing his tariffs, when they averaged in the
low single digits. The tariffs are paid on the U.S. end, either
absorbed by American businesses importing the goods, lowering their
profits, or passed on to U.S. consumers in the form of higher prices
at the cash register.
The deal also includes nonbinding EU commitments to purchase $750
billion in U.S. energy and for EU companies to invest $600 billion
in the U.S. In both cases, the money would come from private
companies and is based on assessment by the European Commission on
what companies were planning to spend.
___
McHugh reported from Frankfurt, Germany, and Hussein from
Washington.
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