EU Moves to Cut Car Tariffs in Exchange for Lifting Duties on U.S. Goods

Updated At : 13:30 PM Aug 29, 2025 IST

The European Commission on Thursday proposed lifting tariffs on imported U.S. industrial goods in exchange for Washington reducing duties on European cars. The proposal is a key element of last month’s trade agreement between the European Union and the United States.

This marks the EU’s first step toward implementing the framework deal reached on July 27 between U.S. President Donald Trump and Commission President Ursula von der Leyen. Under the deal, the EU accepted a broad 15% tariff in order to avoid a potentially devastating trade war.

The United States agreed to reduce its tariffs on EU-made cars from 27.5% to 15%, effective from August 1—the very day the EU legislative proposal was introduced.

The agreement brought an end to an escalating dispute between two of the world’s largest trade and investment partners. Still, the deal remains asymmetric: Brussels must cut tariffs and increase purchases of U.S. energy products, while Washington retains duties on 70% of EU exports.

Trump has repeatedly criticized the European Union, claiming in February that it was “formed to take advantage of the United States” and pointing to the U.S. trade deficit with the EU, projected to reach $235 billion in 2024.

Many EU governments view the deal as the lesser of two evils, noting that Trump had been preparing to impose 30% tariffs on nearly all EU imports.

The removal of tariffs on industrial goods may have limited impact, as two-thirds are already tariff-free. According to the economic think tank Bruegel, the EU’s average tariff on U.S. goods is 1.35%, although it currently imposes a 10% duty on cars.

The EU’s proposals also include concessions on agricultural products—zero tariffs on potatoes, reduced rates on tomatoes, and zero or reduced-tariff quotas for pork, cocoa, and pizza. Beef, poultry, rice, and ethanol remain excluded.

“We are protecting our defensive interests,” said one Commission official. “The commitments we are making are meaningful, but I would also stress they are not overly costly for us today.” He added that other G7 partners have already liberalized trade with the EU.

The legislative proposal must still be approved by a majority of the EU’s 27 member states and by the European Parliament, a process expected to take several weeks.

Supporters of the deal note that while higher U.S. tariffs remain in place, the agreement provides the EU with a unique arrangement: existing U.S. tariffs—such as 2.5% on cars and up to 20% on cheese—are not added to the broad 15% rate.

Certain products, including aircraft, cork, and generic medicines, are exempt from the 15% tariff. However, steel, aluminum, and copper continue to face 50% duties.

The agreement makes little mention of digital services. On Monday, Trump threatened to impose additional tariffs on any country that introduces digital taxes or regulations targeting U.S. companies.