EU Proposes Tariff Swap to Ease US Car Export Duties

The European Commission has formally proposed removing tariffs on a range of US industrial goods in exchange for reduced US duties on European Union car exports, implementing a key element of a bilateral trade agreement reached on July 27 between US President Donald Trump and European Commission President Ursula von der Leyen.

Under the agreement, US tariffs on EU-made cars will fall from 27.5% to 15%, retroactive to Aug. 1. In return, the EU will eliminate tariffs on most US industrial products and offer concessions on select agricultural goods such as potatoes, tomatoes, pork, cocoa, and processed food items like pizza. Highly sensitive products—including beef, poultry, rice, and ethanol—remain excluded.

A Commission official emphasized that the deal seeks to balance trade concessions without significantly harming EU domestic interests. “What we are giving are commitments that are certainly meaningful, but at the same time… not very costly for us today,” the official said, noting that similar liberalization steps have been taken with other G7 partners.

The legislative proposal, submitted Aug. 28, marks the EU’s first step toward ratifying the broader trade deal intended to avert escalating tariffs. It now requires majority approval from the EU’s 27 member states and ratification by the European Parliament—a process expected to take several weeks.

The agreement effectively ended months of trade tension between the world’s two largest economic blocs. EU governments accepted the deal as a trade-off to avoid a threatened 30% blanket tariff on EU imports. Currently, the EU applies a 10% tariff on imported US vehicles, and about two-thirds of industrial goods are already duty-free. The average EU tariff on US goods stands at 1.35%, according to economic think tank Bruegel.

Despite this progress, the deal remains asymmetric. Brussels agreed to reduce duties and increase purchases of US energy products, while Washington retains tariffs on roughly 70% of EU exports. Some products—such as aircraft, cork, and generic pharmaceuticals—are exempt from the 15% tariff rate, but key materials like steel, aluminum, and copper will continue to face 50% tariffs.

Pre-existing US tariffs, including 2.5% on passenger vehicles and up to 20% on dairy products like cheese, will not be compounded by the new 15% blanket rate, offering targeted relief to some EU sectors.

The agreement does not cover digital services or technology regulation. On Aug. 25, Trump threatened additional tariffs on countries that impose digital taxes or introduce new regulations on US-based digital platforms.