President Donald Trump said Sunday that the U.S. and the European Union have agreed to a general framework on trade in which the U.S. will impose a 15% tariff on most goods imported from Europe, while most American goods will be imported into the EU tariff-free, starting on August 1.
Appearing with European Commission President Ursula von der Leyen following talks at his private golf course in Turnberry, Scotland, Trump said the lopsided framework represents “the biggest of all the deals.” Von der Leyen said the agreement will bring “stability” and “predictability” to trade between the regions.
In addition to general tariff levels, the EU agreed to purchase $750 billion in energy products from the U.S. and to invest $600 billion in the country, as well as to buy “vast amounts” of U.S.-made military equipment, Trump said.
Some details still need to be worked out, including the treatment of wine and spirits imported from the EU by U.S. firms. And the agreement does not alter the 50% tariff Trump has imposed on steel and aluminum imports.
Sigh of relief: Worried that Trump would impose a 30% tariff on goods from the EU, as he has threatened to do, many economists and business leaders breathed a sigh of relief at the 15% tariff agreed over the weekend.
On Monday, Trump eased concerns even further, telling reporters that, in general, the tariff rate “for the world” will be similar to the EU tariff.
"I just want to be nice,” Trump said as he met with U.K. Prime Minister Keir Starmer. “I would say in the range of 15 to 20% … probably one of those two numbers.”
Still, even as analysts celebrated tariff levels that were lower than feared, plenty of economists said their basic warning — that tariffs are a tax paid by U.S. firms and consumers that inevitably slow the economy through some combination of higher prices and lower profits —still holds.
Economists at Bloomberg said they expect Trump’s tariffs to shave $2 trillion off the global economy by 2027, relative to the pre-Trump-tariff baseline.
“It’s becoming clear that President Trump’s tariff negotiations are bad for investment,” Daniel Harenberg, lead economist with Oxford Economics, told Bloomberg. “In the end, tariffs may not be as high as feared. Still, they are essentially a tax that puts sand in the wheels of supply chains and global trade.”
According to an analysis by The Observatory of Economic Complexity, an economic simulator developed at MIT and highlighted by CNBC, Trump’s tariffs are forecast to reduce imports into the U.S. in 2027 by 46% relative to the current baseline, or $2.68 trillion. U.S. exports are forecast to grow, but by a smaller percentage, 12%, worth about $1.59 trillion. The overall effect is a reduction in total trade between the U.S. and its partners, though the specific levels will likely change as more details about Trump’s global tariffs are known after August 1.
Question about big investments: The tariff on EU imports is the same as the tariff announced last week on Japanese imports, and both regions agreed to invest hundreds of billions of dollars in the U.S. economy. However, questions have arisen about the nature of those investments, with skeptics suggesting that the numbers are grossly inflated.
Although Trump said that Japan has agreed to invest $550 billion in the U.S. — a number that appears to have increased significantly as Trump wielded his Sharpie pen shortly before the announcement — Japanese officials are now saying that only 1% to 2% of that total represents direct investment. The vast majority will come as loans, said Ryosei Akazawa, Japan’s chief negotiator.
Akazawa also said the loans will not be limited to Japanese firms building facilities in the U.S. but could be used to jointly invest in projects originating from other countries, as well. He cited a possible investment in new Taiwanese semiconductor factories as an example.
Some analysts say they doubt a joint U.S.-Japanese investment fund will ever amount to much. Takahide Kiuchi, executive economist at Nomura Research Institute, said the investment idea is more of a target than a binding promise.
“In reality, under the Trump administration, many Japanese companies likely view the business environment in the U.S. as deteriorating due to tariffs and other factors,” Kiuchi said, per Fortune. “Furthermore, at current exchange rates, labor costs in the U.S. are extremely high, providing little incentive for Japanese firms to expand investment there. If anything, we may see a stronger trend toward diversifying investments away from the U.S.”
Brad Setser, an economic fellow at the Council on Foreign Relations who served as an adviser to the U.S. Trade Representative from 2021 to 2022, said on social media that he has “a feeling that there is a lot less here than meets the eye,” and that any eventual Japanese investments may have occurred with or without the agreement. “Odds are it is vapor ware,” he said.
Questions also quickly emerged about the EU’s pledge to invest $600 billion in the U.S. economy. EU officials said Monday that any investment money would have to come from private companies, which the EU has no power to control.
“It is not something that the EU as a public authority can guarantee,” the officials told Politico. “It is something which is based on the intentions of the private companies.” The officials added that the investment figure came from discussions with European firms about “what their investment intentions are.”
Nils Redeker, an analyst at the Jacques Delors Centre think tank in Berlin, said skepticism is warranted. “This part of the deal is largely performative," he told Politico. "[The EU] is not China, right? So nobody can tell private companies how much they invest in the U.S.”