The United States and the European Union have reached a tentative trade agreement to avert a full-blown trade war as an Aug. 1, 2025, deadline for new US tariffs approaches. US President Donald Trump has indicated a new baseline tariff rate of 15% for most countries, pushing for reciprocal agreements.
This follows a similar deal with Japan, which saw a reduction from a threatened 25% to 15%. While discussions with the EU are ongoing, with both sides expressing optimism for a negotiated outcome, the EU has approved a retaliatory tariff package of up to 30% on €93 billion worth of US goods, to be activated if no agreement is reached. EU countries overwhelmingly supported these countermeasures, which would impact a wide range of US products from soybeans to aircraft.
A finalized tariff agreement, even at a 15% baseline, or a trade war, could significantly impact European automotive, commercial vehicle, and off-highway machinery industries. For the automotive sector, tariffs could lead to reduced exports to the US, the EU’s largest car export market, and increased production costs, especially for manufacturers with complex supply chains spanning both regions.
While high tariffs on buses and heavy commercial vehicles might have limited direct impact due to lower trade volumes, disruptions to global supply chains could still raise costs. Furthermore, any trade barriers risk hindering the industry’s ongoing transition to e-mobility and exacerbating competitive pressures, particularly from emerging markets. A comprehensive deal that includes exemptions or reduced tariffs for these crucial sectors would be vital to mitigate adverse effects. PSR
Emiliano Marzoli is Manager of European Operations for Power Systems Research
