What the EU's tariff deal with Trump means for the tech and automotive sector

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Following the announcement on Sunday of a political understanding between EU Commission President Ursula von der Leyen and US President Donald Trump on an agreement on tariffs and trade, many details remained unclear. Light is slowly being shed on the agreement, which both sides see as a success. However, many observers are still of the opinion that von der Leyen allowed herself to be ripped off by her reality TV-trained opponent.

In principle, the transatlantic deal will result in a uniform upper tariff limit of 15 percent for EU goods, while the UK was able to negotiate a basic tariff of 10 percent. From August 1, the USA would apply this maximum tariff to the vast majority of EU exports, according to the EU Commission. This is an "all-inclusive tariff" and an upper limit. It also includes the Most Favored Nation (MFN) tariff, which was previously levied in addition to the additional tariffs introduced by the USA.

According to the Brussels-based government institution, the upper limit of 15 percent also applies to possible future tariffs imposed by the Trump administration on chips and other semiconductors. The USA is still conducting an investigation into this and wants to decide on this basis whether it will levy additional duties on such products and medicines. Until then, these would continue to be subject only to the MFN.

ASML-Nvidia clause

The deal contains a special provision for suppliers and manufacturers of chip production systems. Their products are exempt from the basic duty of 15 percent and are subject to a "zero-for-zero provision". This means that neither side has to pay any duties. This can be interpreted as a victory for the Dutch supplier ASML, whose lithography process is necessary for the production of ultra-small chips. The group is one of the largest companies in Europe in terms of market capitalization. The machines it supplies are worth several hundred million euros each.

At the same time, large chip manufacturers from the USA, such as Nvidia, who are dependent on ASML technology for their advanced AI-oriented semiconductors and graphics processing units (GPUs), also benefit from this part of the agreement. At the same time, the EU intends to acquire AI chips worth 40 billion euros, which are "essential for maintaining the EU's technological lead". Overall, US producers in particular are likely to benefit from the clause, while little remains of the EU's much-vaunted approach to technological sovereignty.

EU digital laws are left out

During the customs negotiations, representatives of the Trump administration also repeatedly criticized the EU's comparatively strict digital laws, on the basis of which US tech companies in particular are sometimes threatened with severe sanctions. This aspect does not appear in the agreement. There is no agreement for or against digital regulation or relevant taxes on online platforms, an EU official told Politico. The Commission's defense of the Community's autonomy in this area has not received enough attention so far.

Observers were initially unsettled by reports that the Brussels executive wanted to temporarily waive enforcement of the Digital Markets Act (DMA) for US companies as part of the dispute. Changes or suspensions to the EU competition rules and the Digital Services Act (DSA) are now off the table for the time being. But Apple, Google, Meta & Co. are continuing to exert pressure. The IT association Computer & Communications Industry Association (CCIA) has just published a study according to which the EU's digital regulations cost the US industry 97.6 billion US dollars a year in costs and lost revenue. DMA compliance alone accounts for around one billion.

Automotive sector suffers

15 percent tariffs also apply to cars and car parts, on which Trump is currently imposing a tariff of up to 25 percent and an additional MFN of 2.5 percent. The Commission argues that this would provide immediate relief. The EU has agreed to reduce its car tariffs from 10 percent to zero. As part of a similar agreement between the USA and Japan, the Asian country wants to take over vehicles that are approved according to US automotive standards. A corresponding obligation to cooperate and harmonize standards is also included in the EU deal. This could also extend to standards for autonomous driving.

The German Association of the Automotive Industry (VDA) complains that the US tariff will "cost companies in the German industry billions every year" and place an additional burden on them. It is important "that the automotive supply chains, which have been distorted and restricted by the customs dispute, function again". Ferdinand Dudenhöffer, Director of the German Center for Automotive Research, estimates that up to 70,000 jobs could be lost at European car companies and their suppliers if manufacturers relocate their production to the USA to avoid the 15 percent surcharge. The BDI fears "immense negative effects on the export-oriented German industry".

Merz: narrowly avoiding total loss

The Commission defends the deal – and says it was not possible to get more out of it. French Prime Minister François Bayrou spoke of a "black day on which an alliance of free peoples, united to assert their values and defend their interests, submits." German Chancellor Friedrich Merz (CDU) highlighted the exclusion of tariffs in the automotive sector as a silver lining. However, he also conceded: "The German economy will suffer considerable damage."

With the political agreement, which is not yet legally binding, the EU has promised to buy US liquefied natural gas, oil and nuclear energy products worth 750 billion US dollars over the next three years. Experts believe that this is hardly feasible in technical and economic terms.

(olb)