Toward the end of last week, we reported how European auto stocks rallied following a U.S.-Japan trade deal, driven by investor confidence that the European Union (EU) would secure a similar outcome before the end of the month. Well, that's exactly what happened.
President Trump announced on Sunday, July 27, that the United States and the EU have reached a new trade framework, one that resets the terms of transatlantic commerce and consequently carries sweeping implications for the global auto industry. Speaking alongside European Commission President Ursula von der Leyen at his Turnberry golf course property in Scotland, Trump called it the biggest deal he has ever made.
At the heart of the agreement is a new, lower 15 percent baseline tariff that will apply to most EU goods entering the United States, including automobiles. This represents a sharp rollback from the 27.5 percent tariffs on EU auto imports, which included a Trump-era 25 percent levy, announced in April, layered over the long-standing 2.5 percent duty. The revised rate effectively halts the threat of even steeper penalties, which had loomed as high as 30 percent if talks were to collapse.
The deal comes after months of escalating tension and rhetoric between the two sides. Before negotiations began, Trump criticized what he called a fundamentally unfair imbalance. “We don’t sell cars into Europe… they sell millions here,” he declared, singling out brands like Mercedes, BMW, and Volkswagen.
That grievance formed the backbone of his administration’s hardline trade stance, which did lead to some foreign automakers even scaling up manufacturing in the United States. The European Union, for its part, had prepared retaliatory tariffs in case negotiations failed. But Sunday’s agreement de-escalates those tensions.
Automotive exports are expected to benefit the most. Trump emphasized that U.S. automakers, especially those building pickups and SUVs, will now enjoy broader access to the European market. However, not everyone in Detroit shares that sentiment in light of the U.S.-Japan trade deal as it gives Japanese automakers easier access to U.S. markets without equally favorable access for American exports, frustrated some U.S. executives and UAW reps.
Currently, American automakers face higher tariffs on cars made at their Canadian and Mexican facilities. So while on paper, the Big Three Ford, GM, and Stellantis stand to gain from this EU deal, some skepticism could carry over and the scale of the upside depends on execution. For Ford and GM, this could mark a return to greater relevance in a European market where their share has steadily been on the decline. Ford has scaled back operations on the continent, while GM exited the market in 2017.
Stellantis, meanwhile, with its portfolio comprising of several European brands like Peugeot, Opel, and Fiat, has unique leverage over its American competitors, but also added pressure. The market will be keen to see how recently announced CEO, Antonio Filosa, navigates this post-deal landscape and whether he can translate Stellantis’s cross-continental strategy.
Trump called the agreement transformative. “This is a win for every American automaker and factory worker. We’re opening up a market of over 450 million people,” he said. Von der Leyen said, “These were tough negotiations, but this agreement brings stability and fairness to both economies,” she said.
Further, in exchange for tariff relief, the EU has also agreed to dramatically scale up purchases of U.S. agricultural goods, energy supplies, and military equipment. The deal includes significant European commitments to $600 billion in direct investments and $750 billion in U.S. and energy imports.
Next on Trump’s agenda is a meeting with British Prime Minister Keir Starmer on Monday. That discussion, though, will likely focus on geopolitical cooperation, given how a U.S.-UK trade framework is already in place. But for the auto industry, the new U.S.-EU deal is a major development. While this deal does provide some relief to European automakers, whether this translates to more American cars on European roads remains to be seen. But for now, that door is wide open.
