“Key Terms” of US-EU Trade Deal Announced

On Thursday, the United States and European Union published a joint statement, dubbed a “Framework on an Agreement on Reciprocal, Fair, and Balanced Trade.” This is a “first step” that provides further detail on the bilateral deal announced on July 27, 2025. The joint statement addresses nineteen “key terms” comprising commitments by both the United States and the European Union with respect to tariffs, trade facilitation, and economic security. The European Union has separately released a Q&A document regarding the joint statement. The overarching aim of the announced measures is to “resolve {U.S.-EU} trade imbalances and unleash the full potential of our combined economic power.”

Tariff Reduction Front and Center

The major impetus for the deal are planned reductions in tariffs, summarized in the first three paragraphs of the Joint Statement. The European Union’s tariff commitments are as follows:

• To “{e}liminate all tariffs” on U.S. “industrial goods;” and
• Provide “{p}referential market access” for certain U.S. seafood and agricultural goods. Named products include tree nuts, dairy products, fresh and processed fruits and vegetables, processed foods, planting seeds, soybean oil, pork and bison meat, lobster, and processed lobster.

Although not part of the Joint Statement, the European Commission states that “{t}wo thirds of industrial goods were already imported tariff-free” with the remaining industrial goods “subject to already low tariffs,” representing “almost €5 billion” in duty payments by EU importers.

Regarding the second group of measures, the European Commission characterizes ‘preferential market access’ measures as “general{ly}” being implemented via “product-specific Tariff Rate Quotas (TRQs).” TRQs subject imports of an article to a lower tariff rate (e.g., the MFN rate) until a specified volume threshold is surpassed. After that, imports of the article are subject to a different, generally higher, tariff. The EU further casts the products selected for preferential treatment as not “compromising on any of the EU’s sensitivities,” including “sensitive agricultural products” such as beef, poultry, rice, or ethanol.

Tariff commitments made by the United States, summarized below, are essentially limited to reducing certain of the new tariffs introduced by the current Administration:

• For products of the EU subject to reciprocal tariffs, the U.S. has committed to “apply the higher of either the U.S. Most Favored Nation (MFN) tariff rate or a tariff rate of 15 percent, comprised of the MFN tariff rate and a reciprocal tariff, on originating goods of the European Union.” An analogous framework will apply for EU products subject to Section 232 tariffs on automobiles and automobile parts originating from the EU and is “expected to be effective from the first day of the same month in which the European Union’s legislative proposal is introduced.” This will be when the European Commission adopts its proposal for a change in the EU’s tariff, expected this week. The European Commission’s proposal will require approval by the Council of the EU (member states) and the European Parliament before becoming law, a process that is expected to last several months.
• For products of the EU hereafter subject to Section 232 actions on pharmaceuticals, semiconductors, and lumber, the U.S. has agreed to “ensure that the tariff rate, comprised of the MFN tariff and the tariff imposed pursuant to Section 232…applied…does not exceed 15 percent.” Because the precise scope of the products subject to these actions is not yet known, it is not possible to determine whether any covered products may presently be subject to an MFN tariff rate above 15 percent, but that seems unlikely because if such products were covered reducing the total rate imposed to 15 percent would require a change to the Harmonized Tariff Schedule of the United States (HTSUS), e., a legislative change. However, the Trump Administration has taken the position that the various trade “deals” would not require any change to U.S. law.
• For certain other products of the EU, the U.S. will apply “only the MFN tariff.” For now, such products will include “unavailable natural resources (including cork), all aircraft and aircraft parts, generic pharmaceuticals and their ingredients and chemical precursors.” The Joint Statement nevertheless contemplates adding “other sectors and products that are important for their economies and value chains for inclusion in the list of products.”
• For products subject to Section 232 tariffs on steel, aluminum, and their respective derivatives, the U.S. committed to “consider the possibility to cooperate on ring-fencing their respective domestic markets from overcapacity, while ensuring secure supply chains between each other, including through tariff-rate quota solutions.” Although not named in the Joint Statement, progress in this area appears to be linked the EU’s Steel and Metals plan to safeguard EU steel from unfair trade practices.

Finally, there is one area of mutual tariff commitment, viz., that neither the U.S. nor the EU will “impose customs duties on electronic transmissions” and that both will “continue to support the multilateral moratorium on customs duties on electronic transmissions at the World Trade Organization and seek the adoption of a permanent multilateral commitment.” Per the European Commission, this commitment does not, however, implicate EU digital regulations such as the Digital Markets Act and Digital Services Act or member states’ digital service taxes.

Assessing the Outcome

The EU frames the outcome as “compar{ing} well to results obtained by other US trading partners,” an implicit recognition that reciprocal tariffs have become a feature of the U.S. trade policy landscape. 1:1 comparisons are difficult for several reasons. First, because a nominally lower reciprocal-only rate (e.g., 10%) will sometimes yield a higher total tariff burden than a nominally higher MFN-plus-reciprocal rate (e.g., 15%). For example, if the MFN rate for Product A were 3%, then adding a 10% reciprocal tariff would yield a total tariff of 13% (i.e., +10%). By contrast, the 15% “cap” approach would yield a total tariff of 15% (i.e., +12%). But if the MFN rate for Product B were 9%, then adding a 10% reciprocal tariff would yield a total tariff of 19% (i.e., +10%), while the 15% “cap” approach would yield a total tariff of 15% (i.e., +6%).

Second, different U.S. trading partners vary in the extent to which their export-oriented industries are impacted by each of the various Section 232 tariff regimes and pending investigations. A country that exports very little copper to the United States may be unbothered by leaving Section 232 copper tariffs as-is, yet that same country may have a strong desire to reduce Section 232 tariffs on automobiles. At present, some (but not all) products subject to ongoing Section 232 investigations have been expressly excluded from reciprocal tariff coverage. Indeed, depending on a country’s export profile, most of their bilateral export value may presently be exempted from reciprocal tariffs altogether, pending completion of Section 232 investigations into, e.g., semiconductors. Unsurprisingly, announced “deals” have varied in their treatment of different Section 232 tariff regimes and many details remain to be hammered out.

Third, with regard to the EU in particular, it remains unclear what process parties can expect for adding “other sectors and products that are important for their economies and value chains.” Based on information available at this time, it appears less likely that the EU or U.S. will create a formal exclusion process with a request and public comment component for the industries. Rather, it is expected that the intent is to add excluded products only through future negotiations between the U.S. and EU.

Fourth, the date on which a revised tariff rate becomes applicable affects the extent to which a country’s products can benefit in practice. Certain bilateral “deals” have been translated into HTSUS revisions, while others have not yet seen implementation of tariff rate modifications. The EU is negotiating to have the lower 15 percent reciprocal tariff rate applied retroactive application from August 1, 2025.

Finally, comparing real-world outcomes is not simply a matter of comparing rates for each Harmonized Tariff Schedule heading or subheading. One must also account for the volume and value of exports covered by each rate for each country. A deal tailored to the EU’s bilateral export profile may do comparatively little to assist Japan’s major exporting industries.

At a high level, the EU’s outcome does appear comparable to, and perhaps even more favorable than, “deals” with the United Kingdom, Japan, and South Korea, but much will depend on how—and how quickly—these competitors (and others) translate “deals” into practical implementation. For now, the EU’s framing correctly recognizes that competition in the U.S. market among products of different countries will be impacted by their respective tariff burden.

Non-Tariff Measures also in Focus

Several non-tariff measures are also described in the Joint Statement, although they vary significantly in terms of the details provided. Some of the more specific pledges may be characterized as early harvests on the more generalized pledges summarized at the end of this section. These include commitments to:

• “accept and provide mutual recognition to each other’s standards” for automobiles; and
• “streamlin{e} requirements for sanitary certificates for pork and dairy products.”

However, most of the specific pledges relate to particular EU policies. The first three of these were mentioned in USTR’s 2025 report on foreign trade barriers. The EU commits to:

• “address the concerns of U.S. producers and exporters regarding the EU Deforestation Regulation, with a view to avoiding undue impact on U.S.-EU trade;”
• “provide {U.S. small and medium-sized businesses with} additional flexibilities in the CBAM implementation;”
• “not adopt or maintain network usage fees;”
• ensure no “undue restrictions on transatlantic trade” as a result of the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD); and
• allow the designation of U.S. conformity assessment bodies as “Notified Bodies” to carry out tasks under the Radio Equipment Directive 2014/53/EU; and
• “consult with the United States and U.S. traders on digitalization of trade procedures and implementation of the legislation currently proposed on EU Customs Reform.”

Finally, additional open-ended, catch-all commitments are also espoused, including to:

• “enhance opportunities for technical cooperation between EU- and U.S.-domiciled standards development organizations” to develop transatlantic standards in “key sectors of mutual interest;”
• “facilitate conformity assessments to cover additional industrial sectors;”
• “address non-tariff barriers affecting trade in food and agricultural products;”
• “negotiate a mutual recognition agreement on cybersecurity;” and
• “discuss high-standard commitments related to intellectual property rights protection and enforcement;” and
• “address{} non-tariff barriers that might restrict bilateral energy trade.”

Which Export Market Participants Benefit? Rules of Origin Remain to Be Defined

Rules of origin will be a major component in determining who may benefit from the promised reductions in tariffs and non-tariff barriers in practice. On this, the Joint Statement is silent, other than to reference intended “negotiat{ion of} rules of origin that ensure that the benefits” accrue “predominately” to the United States and the European Union.

The ultimate formulation could have significant impacts for production operations located in the EU or U.S. that are headquartered in third countries. For example, a semiconductor Section 232 tariff carve-out may increase the options available to companies like TSMC, which broke ground on an $11 billion fabrication plant in Dresden, Germany in August 2024.

Going Beyond a Deal on Trade in Goods: Global Implications

In a melding of economic and security coverage seen in several other recent U.S. “deals,” e.g., the U.S.-UK Economic Prosperity Deal and the U.S.-Indonesia joint statement, the U.S.-EU Joint Statement addresses issues of economic security adjacent to traditional trade-in-goods. The strategic cooperation initiatives described in with respect to the EU are broadly similar to those identified in connection with other recent U.S. dealmaking. The U.S. and EU will:

• strengthen “cooperation and action” in response to third country imposition of “export restrictions on critical minerals and other similar resources,”
• “tak{e} complementary actions to address non-market policies of third parties,”
• “address…{the} lack of reciprocity in public procurement with respect to third countries;” and
• “cooperat{e} on inbound and outbound investment reviews and export controls, as well as duty evasion.”

In addition to generalized cooperation on export controls, the Joint Statement provides more specifics in the area of technology security. The EU will “adopt and maintain technology security requirements in line with those of the United States” to avoid leakage to “destinations of concern,” after which the U.S. will “endeavor to facilitate such exports.” The European Commission’s Q&A document indicates that this provision relates specifically to “ensur{ing} that state-of-the-art chips used for AI do not end up in hands of untrustworthy partners.”

Separately, the deal includes a commitment to “ensure strong protection of internationally recognized labor rights, including with regard to the elimination of forced labor in supply chains.” The exact form and focus of this cooperation remain to be seen, but could include alignment in the designation of exporters implicated in the use of forced labor.

Finally, the Joint Statement references a series of commercial arrangements, another common facet of recent U.S. dealmaking. Specifically, companies located in the EU will procure U.S. liquified natural gas, oil, and nuclear energy products with an expected offtake valued at $750 billion through 2028; purchase at least $40 billion worth of U.S. AI chips for its computing centers; invest an additional $600 billion across strategic sectors in the United States through 2028; and EU member states will substantially increase procurement of military and defense equipment from the United States, with the support and facilitation of the U.S. government.

More to Be Done, but Unclear Timeline, before the Joint Statement Becomes Reality

The Joint Statement is not a legally binding document. It summarizes the parties’ substantive intentions, but tough negotiations lie ahead over undefined details such as the rules of origin applicable to the planned tariff reductions. Other undefined areas include a list of “industrial goods” to be given zero tariff rates; the specific products subject to EU TRQs; TRQ volume thresholds; the pre- and post-threshold tariff rates for the TRQs. Moreover, new Section 232 investigations have been  announced since the Joint Statement and the EU may seek concessions with respect to these new investigations, in addition to those already identified in the Joint Statement.

Beyond the substance, the timeline for implementation on each side is also unknown. The EU has pledged to “proceed rapidly,” but needs to complete legislative procedures to implement tariff changes. This legislative process will start with a proposal prepared by the European Commission, which will need to be adopted by a qualified majority in the Council of the EU (member states) and a majority in the European Parliament (directly elected representatives). Certain U.S. actions appear to be contingent upon a measure of progress on the EU side, while others do not provide a clear timeline or “triggering” event.

Adjusting Supply Chains and Negotiating Settlements

The attorneys, licensed customs brokers, compliance professionals, economists, and trade specialists of Cassidy Levy Kent regularly assist companies in evaluating their supply chains to ensure compliant market access and adjust for tariff-related developments, both mitigating burdens and taking advantage of opportunities. Cassidy Levy Kent also leverages its thorough understanding of relevant legal regimes to advise governments on tariff policy and procedures.