The United States and European Union have signed a long-awaited framework agreement capping most tariffs at 15%, providing a provisional anchor to transatlantic trade relations.
The deal, announced on 21 August, outlines a uniform tariff ceiling for most EU exports to the United States, along with reciprocal liberalisation on energy, industrial goods, and agricultural products. However, it remains a limited framework rather than a binding treaty, with several sectors — including wine, spirits, and metals — still unresolved.
Under the terms, the US will apply either its standard Most-Favoured-Nation (MFN) rate or a 15% tariff on nearly all EU-originating goods, whichever is higher. The new regime enters effect from 1 September. For certain products — including aircraft components, cork, generic pharmaceuticals, and select natural resources — only existing MFN duties will apply.
Section 232 tariffs on items such as semiconductors, pharmaceuticals, and lumber will be capped at a combined 15%, including the MFN base. The US has also agreed to eliminate Section 232 duties on EU automotive exports that already meet or exceed the 15% threshold. For vehicles below that rate, a cap will apply — but only once the EU introduces complementary legislative measures. Proposals are expected by the end of August.
European Trade Commissioner Maroš Šefčovič confirmed the EU will remove tariffs on all US industrial goods and restore preferential access for seafood, dairy, processed foods, and other agricultural products — many of which had faced retaliatory barriers since 2021.
Energy and technology trade is also embedded in the agreement. The EU has committed to purchasing up to $750 billion USD in American liquified natural gas, oil, and nuclear products, and at least $40 billion USD in US AI chips by 2028. European companies are expected to invest a further US$600 billion in strategic sectors across the United States over the same period.
The agreement also lays the groundwork for expanded cooperation on digital trade, investment screening, critical minerals, and cybersecurity standards. The EU has suspended its retaliatory tariffs until February 2026, providing a limited window for the framework to evolve into a more permanent settlement.
Still, key trade disputes remain unresolved, and the framework — just a few pages long — lacks formal enforcement mechanisms. Analysts have noted that while the tariff ceiling provides short-term clarity, average US duties remain well above pre-2021 levels, and the inflationary impact of trade restrictions may continue to weigh on US consumers.
