US and EU Agree to Cap Tariffs on European Cars, Medicines at 15%

The United States will limit tariffs on European cars, pharmaceuticals, and semiconductors to 15 percent, according to a joint statement from Washington and Brussels on Thursday. This agreement formalises a deal made last month and prevents a full-scale transatlantic trade conflict.
EU Trade Commissioner Maroš Šefcovič described the outcome as the result of “intense, essential work.” However, he noted at a news conference, “This is not the end; it’s the beginning. This framework is a first step.”
The four-page document expands on the handshake agreement that U.S. President Donald Trump and European Commission President Ursula von der Leyen reached when they met at Trump’s Turnberry golf resort in Scotland on July 27.
On the day of the meeting, the two leaders offered differing accounts of the deal, especially regarding pharmaceuticals, which raised worries that European drug manufacturers might be priced out of the U.S. market altogether.
Another significant provision in the statement confirms that U.S. tariffs on autos and auto parts will generally be lowered to 15 percent from 27.5 percent — but this reduction will only take effect after the EU formally introduces legislation to “eliminate tariffs on all U.S. industrial goods.” Currently, the EU charges a 10 percent tariff on car imports.
Šefčovič said the European Commission will introduce this legislation this month, ensuring that Washington will reduce tariffs on European autos starting Aug. 1. He added that the U.S. tariff cuts on European vehicles will be applied retroactively.
The EU will also increase market access for U.S. agricultural goods that are not sensitive to its own market. In return, the U.S. will exempt aircraft and parts, cork, and generic drugs from higher tariffs, applying its most-favoured nation tariff rates to these products.
Washington and Brussels will collaborate to address overproduction in steel and aluminium and will explore the possibility of tariff-rate quotas. This was a key request from the EU to avoid its steel and aluminium exports being subjected to a 50 percent tariff. Both sides will also coordinate efforts against countries—such as China—that impose export restrictions on critical minerals.
The European Commission will investigate providing “additional flexibilities” in applying the EU’s carbon border tax to American companies and will ensure that the EU’s sustainability reporting requirements (CSRD) and supply chain oversight rules (CSDDD) “do not pose undue restrictions on transatlantic trade.”
Reaffirming verbal commitments made at Turnberry, the EU intends to purchase $750 billion worth of U.S. energy, including liquefied natural gas, oil, and nuclear energy products, through 2028. It will also buy “at least” $40 billion worth of U.S. AI chips.
Furthermore, “European companies are expected to invest an additional $600 billion across strategic sectors in the United States through 2028,” the document states.
Negotiations on the document have continued since the initial handshake deal between von der Leyen and Trump prevented the U.S. president’s threat to impose a 30 percent tariff across the board on EU goods.
Šefčovič summed up the agreement as a “serious, strategic deal,” adding that the alternative would have been “a trade war with sky-high tariffs and political escalation.”