Trump tees up a US-EU trade agreement at Turnberry

On Sunday, 27 July 2025, President Donald Trump hosted European Commission President, Ursula von der Leyen, at his Turnberry golf resort in Scotland for what became a pivotal meeting — the setting for a breakthrough in US–EU trade negotiations.

Although the deal is only agreed in principle, the announcement marks a significant turning point for investors and policymakers alike. If agreed by the European Union (EU) member states and the European Parliament, the prospect of escalating tariffs between two of the world’s largest economies appears to be off the table.

Under the terms of the draft agreement, the US will apply a 15% flat tariff to most European goods including automobiles.¹ This figure stands well below the 30% threatened by Trump in July, and investors are likely breathing a sigh of relief. The reduced rate indicates a shift away from confrontation, with von der Leyen herself describing the deal as a “foundation of predictability” for transatlantic commerce.

Crucially, the EU will shelve a planned $109 billion counter tariff package on American exports including wine, dairy, and pharmaceuticals.² Instead, the EU has committed to zero tariffs on strategic US imports including, aircraft and aircraft parts, semiconductor manufacturing equipment, select chemicals, agricultural products and critical raw materials.

However, the deal leaves some sectors exposed. Steel and aluminium for most countries will remain subject to elevated tariffs and pharmaceuticals still face unresolved investigations that may influence future trade terms.

The EU has also pledged to purchase $750 billion in American energy over the next three years.³ An additional $600 billion investment is set to flow from the EU into the US by 2028.⁴ European nations will also dramatically increase purchases of US military equipment, aligning with NATO spending targets and Trump’s domestic manufacturing agenda.

Despite the optimism, trade uncertainty hasn’t vanished entirely. A critical deadline looms on 12 August 2025, marking the expiration of the current US–China tariff truce. Negotiations are ongoing in Stockholm and the hope is for a 90-day extension - potentially setting the stage for a Trump–Xi summit later this year.

Globally, trade frictions have weighed on economic policy uncertainty, with analysts tracking sharp movements in the data following “Liberation Day” on 2 April. However, this US-EU agreement has reduced the risk of escalation and a global economic downturn.

With the worst-case scenario avoided and trade deals being lined up country by country, investors are revisiting company earnings. Using analysis by Deutsche Bank, a 15% tariff — now applicable to goods from Japan and the EU — is estimated to shave around 2.3 percentage points off annual US earnings growth.⁵ Arguably, this has already been factored into analyst forecasts. The MSCI US annual earnings per share growth projections for 2025 dropped from 15% to 9% after the tariff announcements.⁶ Nevertheless, forward guidance for 2026 remains robust at 14%.⁷ Provided no further tariff hikes materialise, analysts believe this drag will be temporary.

Overall, the Trump–EU trade deal offers a stabilising force amid an unpredictable global policy landscape. Markets, it seems, are ready to rally behind it.

1, 3, 4: The White House, Fact sheet: The United States and European Union Reach massive trade deal, 28 July 2025

2. Inc.com, EU Tariffs: European Commission proposes counter tariffs on US, July 2025

5. Deutsche Bank, Q2 earnings: looking for a slight deceleration amidst tariff fog, 7 July 2025

6, 7. Evelyn Partners/LSEG