What was Trump’s Trade Deal with the EU?

 

Imported cars, pharmaceuticals, apparel and others could grow more expensive for US consumers in the months to come. This is as the United States imposes a 15% tariff on most imports from the European Union. Analysts have labelled the agreement, announced July 27, as a win for President Donald Trump. But for U.S. consumers, even the reduced tariff is expected to spur higher prices. The Yale Budget Lab estimates that Trump's tariffs, including the new rate for EU imports, would raise prices by 1.8% in the short run, the equivalent of an average household income loss of roughly $2,400.  

 

Source: https://en.wikipedia.org

While the increase may sound insignificant, “the Federal Reserve’s inflation target is 2%. Some of the sectors that could see higher prices in (the US) in the months to come include:  

 

(i)              European cars 

Automobiles, one of the EU's largest export sectors, will likely see some of the most noticeable price hikes. European auto prices sold in the U.S. will go up probably at least 10%.

 

(ii)            Furniture 

Furniture is another sector that could get hit by tariffs. The Swedish company IKEA, for instance, relies on China, Poland, Italy, Germany and Sweden to supply “the majority” of products.

 

(iii)          Pharmaceuticals 

While certain sectors like wine and spirits appear to still be under negotiation, EU Commission President Ursula von der Leyen said pharmaceuticals will be covered by the 15% tariff, with certain generic drugs not subject to tariffs. The EU is behind about 60% of pharmaceutical imports to the United States, according to Reuters, making them the largest European export to the United States by value.  

 

(iv)           Luxury items 

Luxury items like imported designer handbags and apparel could also see higher prices, as well as imported food. 

The difference between China and Europe, in terms of tariffs, is that the tariffs on China increase what people buy in Walmart and Target. The tariffs on European imports will mainly hit what people buy at Whole Foods and high-end retail stores. The companies behind luxury goods tend to have higher margins and may be more willing to absorb some of the higher costs tied to tariffs. 

 

(v)             Machinery 

Machinery and appliances are also major exports from the EU, accounting for roughly 20% of U.S. imports from the EU in 2021, according to the Commerce Department.  While consumers won’t buy machinery directly, experts warn that the higher prices could eventually trickle down as manufacturers adjust to higher costs.  

The impact of tariffs will vary by sector and country. For Malaysia, we face 25% tariffs on our exports and it is unlikely to drop to 15% after any negotiation. It is good if BNM or some think-tank work out the effects on different scenarios so that businesses are more prepared to handle the implications of Trumpian tariffs on Malaysia.

Reference: 

Trump's trade deal with the EU: What it means for your wallet, Bailey Schulz, USA Today, 29 July 2025