EU to scrap tariffs on US goods to pave way for lower car duties

BRUSSELS: The European Commission proposed on Thursday removing duties on imported U.S. industrial goods in return for reduced U.S. tariffs on European cars, a key part of the trade agreement the EU and the United States struck last month.

AI Brief

The EU agreed to a 15% US tariff and reduced its own duties to prevent a broader trade war with the US.
The US keeps tariffs on 70% of EU exports while the EU makes concessions on cars and select farm products.
Many goods were already tariff-free; key items like beef and ethanol are excluded, and some US tariffs remain high.

The proposals mark the EU's first step in enacting the framework agreement between U.S. President Donald Trump and Commission President Ursula von der Leyen on July 27, which saw the EU accept a broad 15% tariff to avoid a damaging trade war.

The United States agreed to reduce its tariffs on cars built in the European Union to 15% from 27.5% from the first day of the month in which the EU's legislative proposal was presented - meaning now from August 1.

The agreement ended conflict between the world's two largest trading and investment partners, although it is an asymmetric deal, with Brussels required to cut its duties and buy more U.S. energy products while Washington retains tariffs on 70% of EU exports.

Trump has periodically railed against the European Union, saying in February that it was "formed to screw the United States" and has been critical of the U.S. merchandise trade deficit with the EU, which in 2024 amounted to $235 billion.

EU governments have broadly said they accept the deal as the lesser of evils, mindful that Trump was otherwise set to impose 30% tariffs on almost all imported EU goods.

The impact of removing industrial goods tariffs may in fact be modest, with two-thirds already tariff-free. The average EU rate for U.S. goods is 1.35%, according to economic think tank Bruegel, although the EU does charge 10% for cars.

The EU proposals also include farm produce concessions, such as zero tariffs on potatoes, reduced rates for tomatoes and quotas with zero or low tariffs for pork, cocoa and pizza.

It has excluded beef, poultry, rice and ethanol.

"We are protecting our defensive interests there. What we are giving are commitments that are certainly meaningful, but at the same time, I would observe that are not very costly for us today," a Commission official said, adding that other G7 countries had already liberalised trade with the EU.

The EU's legislative proposal will need to be approved by a majority of the EU's 27 members and by the European Parliament, which could take several weeks.

Proponents of the deal recognise that increased U.S. tariffs remain, but point to a unique arrangement for the European Union whereby pre-existing U.S. duties, such as 2.5% for cars and up to 20% for cheeses, are not added to the broad 15% rate.

Some products, including aircraft, cork and generic drugs are exempt from the 15% tariff, but steel, aluminium and copper are stuck at 50%.

The agreement makes little mention of digital services. However, Trump on Monday threatened additional tariffs on all countries with digital taxes or regulations.