This is a segment from the Forward Guidance newsletter. Subscribers receive full editions.
Trump Administration Reaches EU Trade Deal Ahead of July 1 Deadline
FRIDAY marks the deadline for most nations to negotiate new trade agreements with the United States under President Donald Trump’s tariffs policy.
On Sunday, President Trump announced an agreement with the European Union establishing a 15% import levy on certain goods entering the US. The final rate, while significantly lower than his initial proposal on Liberation Day (20%) and the threat issued earlier in the month (30%), is nonetheless higher than the 10% baseline previously applied to numerous imports since the spring.
Concurrent with the tariff agreement, the White House reported that the EU pledged to purchase $750 billion worth of US energy and invest $600 billion in the US economy by 2028. Questions regarding the practical feasibility of this investment commitment have been raised.
Financial markets reacted positively but cautiously. Trading concluded higher on Sunday night, and leading indices showed initial gains on Monday before experiencing a decline by mid-afternoon ET.
Most economists view the EU deal as preferable to an all-out trade war. The resolution is seen as averting the worst-case scenario between the US and its largest trading partner, though details are generally viewed as lacking fanfare. Key provisions include exemptions for “strategic products” such as aircraft, certain chemicals, and raw materials. Luxury goods will initially be subject to the 15% tariff.
However, discrepancies between the agreement terms and ongoing concerns persist. European Commission President Ursula von der Leyen indicated Monday that additional product exclusions could be negotiated in future talks.
While praising the EU deal as a “colossal deal,” the White House refrained from commenting on the potential positive impact of its other major trade negotiation. The US has recently held separate talks with the UK and is meeting again with China to address concerns surrounding the August 12 deadline for imposing higher tariffs on goods traded between Beijing and Washington.
In Scotland during a meeting with UK Prime Minister Keir Starmer, the administration discussed trade matters alongside the ongoing humanitarian crisis in Gaza. Trump asserted on Monday morning that the US was prepared to offer aid, citing reports of potential starvation in the region. Chinese and American officials were scheduled to meet in Sweden on Monday regarding future trade developments.
