The EU-US Trade Framework – The Battle Continues

Introduction

On 21 August 2025, the United States and the European Union unveiled a new Framework on Reciprocal, Fair, and Balanced Trade. The agreement, forged amidst escalating global protectionism and prior threats of broader trade conflicts, was presented as a pragmatic outcome for both the EU and the US. Nevertheless, mere days after its formalization, President Donald Trump renewed his challenges on digital taxes, potentially challenging the basis of the agreement. In this blog post, we examine the framework’s core objectives, areas of compromise, sector specific implications and ongoing challenges.

Main objectives 

The framework was designed with clear, albeit ambitious, objectives:

• restoring a degree of stability and predictability to the vital transatlantic trading relationship,
• rebalancing market access and fostering mutual investment, aiming for a fairer competitive environment, and
• bolstering ongoing cooperation in areas of shared strategic importance, including economic security and critical technology regulation.

The agreement was presented by the leaders as an essential first step, aimed at providing clarity for businesses while acknowledging the groundwork still required for sustained economic growth. It demonstrates the EU’s willingness to address the US’s concerns and its commitment to reaching a swift outcome to quickly stabilise trade relations. Yet the recent threats by the United States to impose “substantial additional tariffs” and “export restrictions on [its] highly protected technology and chips” on countries with digital taxes or regulations deemed discriminatory emphasise the framework’s underlying fragility. 

Key features 

A single lower US tariff cap

A central component of the framework is the US’s commitment to a consistent 15% tariff cap for the vast majority of EU goods. This represents a reduction and simplification from prior, often punitive, tariffs that included compounded duties and significantly affected European exporters. This will provide relief for many industries, particularly the automotive sector, which previously faced tariffs as high as 27.5%.

The relief for EU automotive exports is, however, contingent upon the EU implementing legislation to eliminate its own tariffs on US industrial goods, including its 10% tariff on vehicles. The EU is now fast-tracking the legislative process to secure the 15% tariff for European automotives with retrospective effect.

Strategic carve-outs 

The framework provides welcome exemptions for certain key sectors, ensuring they are subject only to the MFN tariff (the standard tariff rate a country applies to imports from other WTO members), often near zero. These include critical areas such as aircraft and parts, certain natural resources (such as cork), and generic pharmaceuticals and their ingredients. For other strategic sectors like branded pharmaceuticals, semiconductors, and lumber, the 15% ceiling constitutes a firm cap on potential tariffs, providing some predictability amid Section 232 national security investigations that may lead to additional sectoral tariffs.

EU concessions 

The EU has reciprocated by committing to remove its remaining (mostly low-level) tariffs on US industrial goods and to expand market access for specific American seafood and agricultural products, notably pork, dairy, fruit, and processed foods. While sensitive agricultural items such as beef and poultry remain excluded – a protection welcomed by the EU’s farming sector – European farming lobby groups have criticized the overall outcome as “one-sided”, noting that US agri-food products will gain improved market access while many EU producers now face a 15% US tariff on key exports. This concession highlights a difficult compromise made by the EU for broader trade stability.

Investment, procurement and regulatory cooperation

The agreement includes headline commitments for the EU to procure $750 billion worth of US energy (LNG, oil, nuclear) and at least $40 billion in US AI chips by 2028. European companies have also signalled strong interest in investing an additional $600 billion in the US through 2028. While these commitments underscore a deepening economic partnership, they are non-binding and depend on private sector intent. Their full realization therefore remains to be seen.

Both sides have also committed to advancing mutual recognition initiatives for technical and automotive standards, streamlining trade, and increasing cooperation on digital trade regulation and supply chain security. Significantly, the EU is also committed to addressing US concerns regarding the implementation of its sustainability and due diligence rules – the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) – working to reduce administrative burdens and explore flexibilities for CBAM implementation.

Sectoral impacts

The reduced 15% tariff cap will provide stability for the pharmaceuticals, semiconductors and high tech industries, given their reliance on exports, but is nevertheless a blow for the EU pharmaceutical sector, which had been hoping for a total tariff exemption. European carmakers, especially in Germany, are divided on whether the 15% cap is a sufficient reduction from the 27.5% rate that was imposed by the US in April. The EU is set to fast-track legislation to remove all tariffs on US industrial goods (which is necessary for the reduction in duties on EU automotive exports to take effect), bypassing the standard impact assessment for the action. Meanwhile, US carmakers will clearly benefit from the reduction in EU tariffs from 10% to 2.5%. 

US exporters of seafood, dairy, and certain processed foods will see improved access to the EU via new tariff rate quotas. Conversely, many European agri-food exporters will now face a 15% US tariff, an outcome widely criticised by EU producer associations as unbalanced and potentially damaging to the industry.

European wine and spirits producers will also face a clear disadvantage, with the new 15% tariff ending a nearly three-decades of tariff-free access. This presents a significant challenge, raising concerns about lost competitiveness and the potential for future retaliatory measures. 

US energy exporters (especially LNG) and advanced chip makers are positioned to benefit from the EU’s ambitious procurement intentions, reflecting a strategic alignment in securing vital resources for Europe’s future. 

In respect of the contentious steel and aluminium sector, tariffs remain at 50%, demonstrating a key area of unresolved friction and uncertainty. The EU aluminium industry is facing severe scrap shortages and reduced capacity due to US tariffs diverting supply: while exports of steel and aluminium to the US are subject to the 50% duty, shipments of scrap are exempt from the payment of any duties. This scrap shortage is forcing European recycling plants and smelters to reduce capacity, posing an existential threat to the industry. In response, the European Commission is actively considering emergency measures, including a potential levy on all EU scrap exports, to safeguard domestic supply.

Digital trade 

The joint statement is a political agreement and not legally binding, but indicated a more constructive path for US-EU relations. Yet the latest statement from President Trump, barely after the ink was dry, potentially undermines this trajectory and the potential benefits for a number of the sectors highlighted above. 

Although Trump’s statement did not specifically name the EU (or any other nation), the US has previously challenged Europe’s digital rules (the Digital Services Act, the Digital Markets Act, and the AI Act). The EU swiftly responded by confirming that it will continue to uphold “the sovereign right of the EU and its member states to regulate economic activities on our territory which are consistent with our democratic values” and emphasising that trade and digital rules were “separate questions” from the framework. 

What happens next?

Many details, particularly legislative changes and unresolved sectoral disputes, remain open to further negotiation and political risk. While the EU has taken the first steps towards implementing the framework by putting forward proposals relating to industrial goods, agricultural goods and seafood, the framework requires consent by all 27 members of the EU, each with distinct interests, and a number of which have expressed dissatisfaction with the outcome for the EU. In the meantime, we can look forward to more specific details of the agreement being revealed in the coming weeks and months.