EU Proposes Legislation to Enact Transatlantic Trade Framework by Eliminating Select U.S. Tariffs and Reducing Auto Duties to 15%

On August 28, the European Commission unveiled two legislative proposals aimed at enacting the joint tariff agreement reached between the United States and the European Union, marking a significant step toward formalizing the trade arrangement. The proposed legislation outlines the removal of select U.S. tariffs on industrial goods, the continuation of duty-free access for lobster and its derivatives, and preferential entry for designated seafood and low-sensitivity agricultural products. In exchange, the United States has agreed to reduce its 27.5% tariff on European automobiles and components to 15%, effective retroactively from August 1, and to implement zero or near-zero tariffs on cork, aircraft and related parts, generic pharmaceuticals, and chemical intermediates beginning September 1.

Acknowledging the time-sensitive nature of the agreement, the Commission intends to bypass standard impact assessments and accelerate the legislative process. Within the agricultural domain, the proposals include eliminating tariffs on potatoes and lowering duties on tomatoes, while introducing quota-based zero or reduced tariffs for items such as pork, cocoa, and pizza. However, exclusions remain for beef, poultry, rice, and ethanol.

The revision of automotive tariffs holds considerable implications for the European economy. In 2024, Germany alone exported USD 34.9 billion in vehicles and components to the United States. Major automakers such as Mercedes-Benz, BMW, and Volkswagen have reported notable declines in revenue and earnings during the first half of the year. The current U.S. tariff regime is projected to reduce their combined cash flow by approximately EUR 10 billion in 2025, with the proposed tariff cut potentially offering relief valued at over EUR 500 million per month.

Although the tariff reduction will only be activated once the EU formally submits the necessary legislation, a White House official has indicated that the United States will begin applying the agreed terms upon introduction of the bills, foregoing the need for full parliamentary ratification. While two-thirds of U.S. industrial imports already benefit from duty-free status—limiting the immediate effect of further removals—the average tariff on EU goods remains at 1.35%, compared to 10% on vehicles.

The agreement is not entirely reciprocal. The EU is required to lower specific tariffs and increase its purchases of American energy products, while the United States maintains duties on 70% of its imports from the EU. Despite this imbalance, European governments have largely endorsed the deal as a practical measure to prevent a broader escalation of U.S. tariffs on EU exports. European Commission President Ursula von der Leyen characterized the arrangement as “a strong agreement, even if not perfect,” underscoring its value in fostering predictability and avoiding a trade dispute.

While the accord addresses goods tariffs, it leaves unresolved issues in the digital services sector, where tensions may continue. Former U.S. President Donald Trump has repeatedly threatened additional tariffs on countries implementing digital taxes, and EU officials have cautioned that such actions could prompt a reevaluation of the broader agreement.