US-EU trade deal: What is it – and what does it mean for European competitiveness?

After weeks of wrangling, US President Donald Trump and European Commission President Ursula von der Leyen announced this week that the US and EU have agreed on a major trade deal.

The agreement establishes a new baseline for transatlantic commerce, and sets a 15% tariff ceiling on most EU exports to the US.

Some of the finer details are still unclear, yet a factsheet published by the White House states the EU has also committed to large-scale investments and purchases of American energy and military equipment. Only the first of those has been confirmed by the European Commission.

The deal was struck under the threat of sharply escalating tariffs, and both sides have presented it as preferable to an all-out trade war. However, while the tariff rates agreed are half the 30% rate previously indicated by President Trump, it does mean that many European exporters will face higher costs entering the US market than was previously the case.

After a period of real uncertainty, officials are painting the deal as offering stability and predictability for businesses on both sides of the Atlantic. But while we are still waiting on many details to be rounded out, there has already been a backlash from several quarters, with fears that EU competitiveness will be compromised.

Here's what you need to know.

The deal sets a new 15% tariff ceiling on all EU exports "currently subject to reciprocal tariffs", according to the European Commission (EC). It also applies to cars and car parts, and to "any potential future tariffs" on pharmaceuticals and semiconductors.

The White House says tariffs of 50% will remain in place for EU steel, aluminium and copper. The EC says the EU and US will establish "tariff rate quotas for EU exports at historic levels, cutting the current 50% tariffs, while jointly ensuring fair global competition".

The EU has also agreed to buy an additional $750 billion in US energy products over the next three years and make investments worth $600 billion in "various sectors" in the US by 2029. The US will not face higher tariffs for exporting to the EU in return.

US-EU trade in goods and services has doubled over the past decade, surpassing €1.6 trillion in 2024, or €4.2 billion a day.

In a statement announcing the agreement, the White House described it as "fundamentally rebalancing the economic relationship between the world’s two largest economies". It will open up market access and re-establish a positive long-term relationship between the two economies, it said.

But several European business leaders and politicians have a more pessimistic outlook for trade.

German Chancellor Friedrich Merz has criticized the deal as hurting both the US and EU, saying it will cause "considerable damage". Germany is Europe's largest exporter of goods to the US followed by Ireland, Italy and France.

French Prime Minister François Bayrou said the deal was "a dark day" for the EU.

Concerns about rising inflation and its impact on economic growth in Europe have been raised, too. Merz, for instance, warned that higher inflation rates could be a consequence of the shift in US trade policy. It remains to be seen whether the higher costs will be absorbed by European companies trying to protect market share, or if they'll be passed on to US consumers, potentially reducing demand.

Many of the details of the agreement are yet to be finalised, and implementation will depend heavily on business investment decisions rather than EU-level policy.

Still, many are sanguine about the fact that it is better to have a deal in place than no deal at all. EU Trade Commissioner Maroš Šefčovič, for instance, said it was the "best deal we could get under very difficult circumstances".

As the chart below shows, higher tariffs are set to come in on 1 August for those countries that have not yet made deals with the US.

At the beginning of July, the World Economic Forum convened the inaugural meeting of Leaders for European Growth and Competitiveness with the aim of accelerating action across clean energy, financial markets, strategic alliances and technology.

The gathering came as economic growth across the region remained subdued after trade uncertainty and geopolitical tensions. However, the Forum's mid-year Chief Economists Outlook found a slightly more optimistic outlook for the bloc, albeit off a low base, with just under half predicting moderate or strong growth.

It remains to be seen how the new tariffs deal with impact European growth and its competitiveness plans going forward.