EU Parliament backs US trade deal as 15% tariff ceiling takes effect

The European Parliament approved a landmark trade pact with the US on Tuesday, clearing the final hurdle to implement tariff cuts and defuse a volatile chapter in transatlantic relations.

The European Parliament approved a trade pact with the US on Tuesday, clearing the way for a 15% tariff ceiling on EU exports and averting a return to the trade conflict that rattled global markets last year.

"This agreement provides much-needed clarity for German automakers, but trade barriers remain too high — particularly on trucks," a spokesperson for the German Association of the Automotive Industry (VDA) said.

The deal passed with 440 votes in favor, 151 against and 50 abstentions in Strasbourg. It sets US tariffs on most EU goods at 15% while Brussels eliminates duties on US industrial products. The arrangement runs through December 2029, ensuring it covers the remainder of Trump's current presidential term.

The approval puts the EU on track to meet Trump's July 4 deadline, defusing his threat of new tariffs on European vehicles. Yet fresh trade tensions have already emerged, with Trump threatening 100% tariffs on French wine over France's 3% digital services tax and the US Trade Representative imposing a 10% levy on EU products over forced labor allegations.

The deal, first struck at Trump's Turnberry golf course in Scotland last summer, represents the most significant transatlantic trade agreement since the Trump administration returned to the White House. EU Trade Chief Maroš Šefčovič described the vote as an "important milestone" proving that the "EU is delivering on its word."

The pact includes safeguards allowing the European Commission to suspend concessions if the US fails to comply with its commitments — notably if it maintains tariffs above 15% on steel and aluminum products or introduces additional trade measures. Bernd Lange, the Parliament's lead negotiator, said lawmakers would "keep a close watch on the implementation."

Truck Tariffs Remain a Flashpoint

The VDA's concerns over truck tariffs highlight a persistent friction point. While the deal lowers barriers on passenger vehicles, commercial trucks face steeper duties that the German auto lobby says undermine the agreement's benefits. The EU has also demanded lower tariffs on metal derivative products by the end of the year.

The last major US tariff escalation on European autos came in 2025, when Trump threatened 25% levies on EU vehicle imports before the Turnberry deal was reached. That threat alone weighed on European auto stocks, with the Stoxx Europe 600 Automobiles & Parts Index falling as much as 8% over a two-week period. German automakers including Volkswagen AG, BMW AG and Mercedes-Benz Group AG — which count the US as a top export market — were among the most exposed. The sector accounts for roughly 20% of total EU goods exports to the US, making it the single most important industrial category in the transatlantic trade relationship.

New Threats Cloud the Outlook

Even as the deal moves toward implementation, new trade disputes are emerging. Trump's threat of 100% tariffs on French wine and champagne targets France's digital services tax on US technology companies, linking trade policy to tax sovereignty ahead of the G7 summit in Evian. The dispute affects a bilateral wine trade valued at roughly $4 billion annually, according to industry data.

Separately, the US Trade Representative's 10% tariff on EU products citing forced labor concerns adds another layer of uncertainty. Brussels has called the measures unjustified, suggesting possible retaliatory action that could further complicate the trade situation. The previous US tariff escalation on EU goods in 2025 reduced bilateral trade flows by an estimated $12 billion over six months, according to European Commission data.

The Council is expected to formally endorse the deal next week, after which it will be published in the EU's official journal and take effect. For German automakers and other EU exporters, the agreement removes one source of uncertainty — but the tariff environment remains fragmented, with multiple disputes running in parallel. The euro traded near $1.12 against the dollar on Tuesday, little changed on the day, as markets priced in the approval while weighing the fresh trade risks.

This article is for informational purposes only and does not constitute investment advice.