European Union pauses planned retaliatory tariffs on the U.S. for six months

Following a late July development, in which the framework of a large trade deal between the United States and the 27-nation bloc comprising the European Union, which collectively represents the largest trading partner for the U.S., was finalized, various reports published earlier this week stated that the EU is pausing is planned tariffs on U.S. goods, originally set for August 7, for six months, providing more time for both sides to come to terms on a broader agreement.

This marks the EU’s third delay in rolling out tariff retaliation. The countermeasures would have hit around $101 billion worth of U.S. exports, including cars, spirits, steel, and chemicals.

Under the July deal, the U.S. agreed to reduce its planned tariffs from 30% to 15% on most European goods. In return, European companies are expected to increase investment in the U.S. by up to $600 billion, and step up purchases in energy and defense.

Still, several sticking points remain. U.S. tariffs on European steel and aluminum are still as high as 50%, and there’s been no final decision on key sectors like pharmaceuticals, spirits, and certain auto parts.

Germany’s finance minister called for the EU to take a firmer stance in trade talks, pushing for clearer terms so businesses can plan ahead. He also floated the idea of using quotas to manage steel exports.

EU officials say they’ll use the next few months to try to settle remaining issues. But if talks fall apart, the bloc is ready to bring back its tariffs in early 2026.

“The commission will take the necessary steps to suspend by 6 months the EU’s countermeasures against the U.S., which were due to enter into force on Aug. 7,” commission spokesperson Olof Gill said on Monday, in a Wall Street Journal report.

And a Reuters report observed that the retaliatory tariffs are in two parts: one in response to U.S. steel and aluminum duties, with the other focused on President Trump’s baseline and car tariffs.

Under the terms of the U.S.-EU deal outlined in a White House fact sheet, the EU will purchase $750 billion in U.S. energy and make $600 billion in new investments in the U.S. by 2028. And the EU will pay a 15% tariff on goods imported into the U.S., including autos and auto parts, pharmaceuticals, and semiconductors, while the sectoral tariffs on steel, aluminum, and copper will remain at 50%, with the White House noting that the U.S. and EU “will discuss securing supply chains for those products”—and that this “tariff regime” will generate tens of billions in revenue annually and help in closing the longstanding trade imbalance between the U.S. and EU, in various ways, through encouraging local sourcing, reshoring production, and ensuring foreign producers contribute their fair share to the American economy.

“This Framework demonstrates that America can maintain tariffs to reduce the goods trade deficit and simultaneously unlock market access for hardworking Americans whose interests remain firmly at the center of every deal made,” said United States Trade Representative Ambassador Jamieson Greer in a statement. “I thank European Trade Commissioner Maroš Šefčovič for his cooperation and commitment to pursue reciprocal, fair trade with the United States.”

Paul Bingham, Director, Transportation Consulting, for S&P Global Market Intelligence, explained that while many important details between the U.S. and EU remain unknown, overall, the 15% tariff rate will reduce the U.S. import tariffs on the EU countries to an effective average of 13.1% down from 13.5% currently (including 10% standard U.S. reciprocal import tariffs, 25% automotive import tariffs, and the 50% Section 232 tariffs on copper, steel, and aluminum imports. Should imports of European Union pharmaceuticals (currently subject to near-zero US tariffs) also be included in the 15% tariff coverage, he said that the effective US import tariff rate would rise to 17%. 

“That is compared with the threatened 30% tariff rate that had been scheduled by the US to take effect August 1, so [it is] a reduction in the potential impediments that U.S.-EU trade had been facing next month,” he said. “The 15% US import tariff rate echoes the recently announced US agreement with Japan, but is higher than the 10% US import tariff rate agreed to earlier with the United Kingdom.”