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The United States and the European Union struck a long-awaited tariff framework Thursday, capping duties on pharmaceuticals, semiconductors and lumber imports at 15% after weeks of tense negotiations.
The agreement averts the steep tariff hikes threatened by President Donald Trump, who had warned of rates as high as 250% on European pharmaceuticals and 100% on semiconductors. The deal comes amid Trump’s aggressive trade push, which has unsettled markets and alarmed economists who warn tariffs risk fueling inflation.
“Faced with a challenging situation, we have delivered for our Member States and industry, and restored clarity and coherence to transatlantic trade,” European Commission President Ursula von der Leyen said in a statement.
Key Terms of the Deal
The framework caps tariffs on critical sectors at 15%, while also rolling back duties on a range of goods starting Sept. 1. Those items include:
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Unavailable natural resources such as cork
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Aircraft and aircraft parts
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Generic pharmaceuticals and their ingredients
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Chemical precursors
European Trade Commissioner Maroš Šefčovič called the deal “a first step, one that can grow over time.” However, the EU failed to secure an exemption for its wine and spirits industry — a disappointment for European negotiators and U.S. restaurants and bars already grappling with higher alcohol prices.
“These new higher tariffs on EU spirits products will further compound the challenges facing restaurants and bars nationwide,” said Chris Swonger, president of the Distilled Spirits Council.
Economic Commitments and Energy Deals
The EU also pledged to boost purchases of American energy and technology. According to the joint statement:
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Europe will procure $750 billion worth of U.S. liquified natural gas, oil and nuclear energy products through 2028.
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The bloc will buy at least $40 billion in U.S. artificial intelligence chips for European computing centers.
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European companies are expected to invest $600 billion in U.S. strategic sectors over the same period.
Trump has touted those figures as binding commitments, calling them “a gift” to the U.S. economy. But the joint text describes them only as “expectations” through 2028.
“The details are $600 billion to invest in anything I want,” Trump said in an August interview with CNBC, adding that governments failing to follow through would face “immediate” tariff hikes.
Transatlantic Auto Dispute
The deal also sets the stage for lowering U.S. auto tariffs — but only if the EU passes legislation to reduce its industrial tariffs. A senior administration official said that simply introducing the bill would trigger lower American auto tariffs retroactive to Aug. 1.
The European Commission said it plans to move quickly on legislation. Šefčovič added that he had received assurances from Washington that tariff relief on autos would follow once the measure was introduced.
Political and Market Reactions
Commerce Secretary Howard Lutnick hailed the outcome as a win for the president’s “America First Trade Agenda.”
“The America First Trade Agenda has secured the most important trading partner, creating a major win for American workers, U.S. industries, and our national security,” Lutnick wrote on X.
Irish Prime Minister Micheál Martin, whose country is a leading exporter of pharmaceuticals and semiconductors, said he welcomed the clarity of the agreement. “Given the scale of the pharmaceutical and semiconductor sectors in Ireland, it is important that the Joint Statement confirms that 15% is a ceiling,” he said.
Still, European officials stressed that tariffs ultimately fall on U.S. companies and consumers. “In the end, it is usually the consumers (in this case, U.S. consumers) who will indirectly pay for the tariffs,” the EU’s statement said.
