EU and US Announce Framework Trade Agreement

On August 21, 2025, the European Union and United States unveiled their Framework on an Agreement on Reciprocal, Fair, and Balanced Trade (“Framework“).  The Framework follows, and provides further detail to, the July announcement that the European Union and United States had agreed on broad terms of a trade deal.

The Framework outlines the key terms of the trade deal that will be negotiated between the parties, and is a first step in a process that can be further expanded over time.  The Framework confirms the earlier announcement that a 15% duty will apply to most EU products imported to the United States, while many US products will enter the European Union duty free.  Some of the key aspects of the Framework include:

• Eliminating and reducing tariffs on US products: The European Union will eliminate tariffs on US industrial goods, and apply “preferential market access” to US seafood and agricultural goods.   Goods with “preferential market access” include tree nuts, dairy products, fresh and processed fruits and vegetables, processed foods, planting seeds, soybean oil, and pork and bison meat. It is expected that these reductions will be implemented through product-specific tariff-rate quotas, wherein a lower tariff rate apples to imports below a specified quantity, with a higher rate kicking in when imports of that product exceed the threshold. A more granular list of products, along with their respective tariff-rate quotas will likely be published in due course.

• Tariffs on EU products entering the United States: The United States will apply the higher of the US most favored nation (“MFN”) tariff rate or a 15% tariff rate on most EU goods. The Framework confirms that will not accumulate with existing applicable duties, with a Q&A published by the European Commission describing this feature as a “15% tariff ceiling.”

• MFN-only rate applied to key EU goods: For specific classes of goods—including unavailable natural resources (such as cork), all aircraft and aircraft parts, generic pharmaceuticals and their ingredients and chemical precursors—the United States will only apply the MFN rate, effective September 1, 2025.  The European Union and United States will also consider other classes of goods which may be suitable for inclusion in the list of products to which only the MFN rate would apply. Earlier communications from the negotiating parties had indicated that a zero-for-zero tariff arrangement would apply to such products. In any event, it is expected that the MFN rate applicable to these product categories will be 0% or negligible.

• EU goods subject to Section 232 investigations: The United States will ensure the tariff rate applicable to pharmaceuticals, semiconductors, and lumber, which consists of the MFN tariff and potential future Section 232 tariffs, does not exceed 15%. According to the Commission Q&A, this rate will only apply once the relevant Section 232 investigation has concluded and the United States has decided whether to impose a Section 232 tariff on such goods. Additionally, no Section 232 automobile or automobile parts tariffs will apply to EU goods with an MFN rate of 15% or higher and, for goods with an MFN rate lower than 15%, a combined rate of a maximum of 15% (comprised of the combined MFN and Section 232 tariffs) will apply.  This is notable because President Trump and some Trump Administration officials have indicated potential Section 232 tariffs of 100% and even 300% for semiconductors and rates as high as 200% or 250% for pharmaceutical products.

• Steel and aluminum: The Framework memorializes the intention of the European Union and the United States to cooperate to ring-fence their domestic markets for aluminum and steel (and their respective derivatives) from global overcapacity and to secure supply chains in these products.  The European Union will attempt to address these concerns through its proposed Steel and Metals Action Plan (SMAP), which aims to protect European metal from unfair trade practices and global overcapacity. In the United States, steep tariffs have been levied on steel and aluminum products to curb excessive importation that is claimed to have harmed domestic production capacity.

• EU investment commitments: The European Union will purchase $750 billion of US liquified natural gas, oil, and nuclear energy and at least $40 billion worth of US AI chips.  The joint statement also indicates that EU companies are expected to invest $600 billion across US strategic sectors through 2028 and that the European Union plans to increase its procurement of US military equipment.

• Reduction of non-tariff barriers: The United States and European Union will also commit to removing non-tariff barriers to trade, such as by mutual recognition of automobile standards between the jurisdictions or by working to streamline sanitary certification for agricultural products. The United States and European Union also commit to facilitate conformity assessments to cover additional industrial sectors.  Additionally, the European Union will work to mitigate the impacts of EU instruments like the Deforestation Regulation, the Carbon Border Adjustment Mechanism, Corporate Sustainability Due Diligence Directive, and the Corporate Sustainability Reporting Directive on trade with the United States.

• Digital trade: The Framework also signals the commitment of the European Union and United States to remove barriers to digital trade, such as network usage fees and the imposition of duties on electronic transmissions.  In a subsequent comment to the press, Maroš Šefčovič, the European Commissioner for Trade and Economic Security, confirmed that the European Union’s Digital Markets Act, Digital Services Act, and digital services taxes were not addressed in the deal.

• Rules of origin: Rules of origin will be negotiated to ensure that the benefits of the agreement will predominantly flow to the United States and European Union.

• No special treatment for EU wine and spirits: Almost as significant as what was included in the Framework is what was omitted.  For one, it does not include exceptions or special treatment for EU wine and spirits, which enjoy a significant market in the United States and which were the subject of much debate and speculation amid the negotiations.  Nevertheless, Commissioner Šefčovič indicated that additional sectors might be targeted for exemption from US tariffs going forward.

• Cooperation on export controls: The European Union and United States will cooperate to protect their economies and enhance supply chain resilience by coordinating their export control policies to prevent diversion of sensitive goods and technologies — such as advanced AI compute — to countries of concern. The Framework also calls for the European Union and United States to cooperate on addressing export controls imposed by third countries on critical mineral supplies.

While the Framework represents a significant step toward a workable final deal, significant details remain subject to further negotiations before a final agreement is concluded.  As Commissioner Šefčovič stated in prepared remarks on the Framework, “this is not the end.  It is the beginning.”  In addition to exemptions, many specifics of the ultimate agreement — such as its implementation timeline, enforcement mechanisms — remain to be confirmed. Additionally Commissioner Šefčovič indicated that the European Union “will need to translate key elements of the joint statement into legislative proposals.” We will continue to monitor and report on developments regarding EU-US trade as the sides work toward finalizing and implementing the agreement.

We are closely monitoring all developments in this area and continue to work on these issues daily to ensure our clients are well-informed and prepared. Please don’t hesitate to reach out should you have any questions or wish to discuss how these changes may impact your operations—the entire Global Trade network at Baker McKenzie is here to support you every step of the way.