After months of tense negotiations, including repeated threats by Donald Trump to increase tariffs on the European Union, the US on Sunday (July 27) announced it had reached a trade deal with the bloc.The deal announced by US President Trump and European Commission President Ursula von der Leyen at his golf club in Turnberry, Scotland, sets a baseline tariff rate of 15% on all European goods, effective Friday (August 1).To recap, Trump had previously announced a 10% baseline tariff on most imports from the EU, 25% tariffs on automobiles, and 50% tariffs on steel and aluminium. Since April, the US has charged an additional 10% ‘reciprocal’ tariff on top of the pre-existing 4.8% average duty on imports from the EU. Earlier this month, he threatened to impose 30% tariffs if a deal was concluded by August 1.“It’s the biggest of all the deals,” Trump said on Sunday. “I think it’s going to be great for both parties,” von der Leyen concurred, describing this as “the best we could get” and saying, “Today’s deal creates certainty in uncertain times.”Here is all you need to know.1 – Baseline tariff at 15%All EU goods will face a baseline tariff of 15%, half the 30% rate Trump had threatened to implement come August 1. The deal includes medicines, semiconductor chips, and cars.US exporters would now have access to European markets, and may face zero tariffs for certain products. The zero tariffs would reportedly apply to sectors including “all aircraft and component parts, certain chemicals, certain generics, semiconductor equipment, certain agricultural products, natural resources and critical raw materials”, von der Leyen said.A Reuters report quoted a US official as saying that commercial aircraft would face zero tariffs for now, while there was a “reasonably good chance” that a new rate less than 15% could be realised later.Story continues below this adUncertainty still remains over the tariffs European wine and spirits producers will face in the US, but she said the matter would be resolved in the coming days.2 – Steel and aluminium tariffs remain at 50%, cars effectively at 27.5%The deal does not include European steel and aluminium, which continue to face a separate 50% import tax. However, von der Leyen said that further negotiations could yield a quota system, wherein such imports within a certain quota could escape the additional duty.Meanwhile, European cars face a 27.5% tariff, with Trump’s 25% rate coming atop the pre-existing 2.5% tariffs in place. Germany will likely bear the brunt, given its export-driven economy and large automotive sector. Manufacturers VW, Mercedes and BMW were among the worst-affected by the tariffs, in place since April. While German Chancellor Friedrich Merz welcomed the deal, industrial groups in the country have been critical of it. The Federation of German Industries (BDI) called the deal “an inadequate compromise” that “sends a fatal signal to the closely intertwined economies on both sides of the Atlantic.”The US has been the second major market for the European auto industry. Data from Acea (the European Auto Manufacturers Association) showed that the EU exported 757,654 new vehicles to the US last year, worth €38.9 billion ($45.41 billion), and imported 169,152 new vehicles from the US, worth €7.8 billion ($9.1 billion).3 – European investment commitments in the USStory continues below this adThe EU has agreed to purchase American energy products worth $750 billion, chiefly oil, gas, including liquified gas, nuclear fuel and semiconductors. It will also invest $600 billion in the US in addition to its current investments, including purchases of military equipment, Trump said.von der Leyen confirmed the EU would commit to buying $250 billion of US energy products annually for the next three years. “With this deal, we are securing access to our largest export market,” she said.Trump also said that the EU would purchase a “vast amount of military equipment” from the US. However, no definite purchase commitment has been made. Since the war between Russia and Ukraine commenced in 2022, the EU has increased its military spending, boosted by Trump’s remarks earlier in the year pushing for increased European military spending. Thus far, they have focused on purchasing military equipment from European companies.4 – Only temporary relief for semiconductors, pharmaceuticalsThe deal currently retains the 15% tariff rate for pharmaceuticals and semiconductors, which are subject to separate tariff investigations. The Guardian reported that sources said the EU investment commitments helped seal the 15% tariffs on pharmaceuticals and semiconductors.Story continues below this adHowever, both sectors face the threat of additional tariffs in the future. Trump has previously threatened 200% tariffs on pharma imports, while US Commerce Secretary Howard Lutnick said that semiconductor tariffs could also be announced in the coming weeks.Data from the European Commission’s data wing, Eurostat, indicate that medicines were the EU’s top exports to the US in 2024, amounting to nearly €80 billion. Ireland, which Trump has accused of having “the entire US pharmaceutical industry in its grasp”, has been the largest pharma exporter.5 – An Ireland-shaped problemThe tariff announcement presents a unique conundrum for the island of Ireland, wherein traders in Northern Ireland, a constituent of the UK, can sell goods to the US at 10% tariffs, while Ireland the country faces the 15% tariff rate.A similar situation was last faced during Brexit, when Northern Ireland (as part of the UK) exited the EU in 2020, while Ireland remained a member of the bloc. After tedious negotiations, the two arrived at the Windsor Framework in February 2023, which resolved the issues around customs arrangements. A similar understanding will now become necessary for the two regions to ensure stability across the island and diplomacy continues under the Good Friday agreement, which formally ended 30 years of conflict between Ireland and Northern Ireland.Story continues below this adIreland’s deputy prime minister, Simon Harris, said he “regretted” the 15% tariff rate but said “certainty” was important.US-EU trade in the pre-tariff eraIn 2024, the total goods trade between the US and the EU amounted to $975.9 billion, US Trade Representative data showed. The US ran a $235.6 billion trade deficit with the EU, a 12.9% increase over the previous year.European Commission data showed that the US was its largest trading partner in 2024, accounting for 20% of EU goods exports, with Germany, Ireland, France and Italy as the top exporters. The major exports from the EU were over €200 billion (over $227 billion) of machinery and vehicles, €160 billion (over $182 billion) of chemicals and €25 billion (over $28 billion) of food and drink.