US And EU Avert Trade War With 15% Tariff Deal

Key points:

The U.S. struck a framework trade agreement with the European Union, imposing a 15% import tariff on most EU goods - half the threatened rate, a week after agreeing to a trade deal with Japan that lowered tariffs on auto imports.

Countries are scrambling to finalise trade deals ahead of the August 1 deadline, with talks between the U.S. and China set for Monday in Stockholm amid expectation of another 90-day extension to the truce between the top two economies."A 15% tariff on European goods, forced purchases of U.S. energy and military equipment and zero tariff retaliation by Europe, that's not negotiation, that's the art of the deal," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities. "A big win for the U.S."

S&P 500 futuresrose 0.4% and the Nasdaq futuresgained 0.5% while the eurofirmed across the board, rising against the dollar, sterling and yen. European futuressurged nearly 1%.In Asia, Japan's Nikkei slipped after touching a one-year high last week while MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up 0.27%, just shy of the almost four-year high it touched last week.While the baseline 15% tariff will still be seen by many in Europe as too high, compared with Europe's initial hopes to secure a zero-for-zero tariff deal, it is better than the threatened 30% rate.

The deal with the EU provides clarity to companies and averts a bigger trade war between the two allies that account for almost a third of global trade."Putting it all together, what we've seen with Japan, with the EU, with the talks which are due to be held in Stockholm between the U.S. and China, it really does negate the risk of a prolonged trade war," said Tony Sycamore, market analyst at IG.

"The importance of the August tariff deadline has significantly been diffused."The Australian dollar, often seen as a proxy for risk sentiment, was 0.12% higher at $0.65725 in early trading, hovering around the near eight-month peak scaled last week.

FED, BOJ AWAIT

In an action-packed week, investors will watch out for the monetary policy meetings from the Fed and the BOJ as well as the monthly U.S. employment report and earnings reports from megacap companies Apple, Microsoftand Amazon.While the Fed and the BOJ are expected to stand pat on rates, comments from the officials will be crucial for investors to gauge the interest rate path. The trade deal with Japan has opened the door for the BOJ to raise rates again this year.

Meanwhile, the Fed is likely to be cautious on any rate cuts as officials seek more data to determine if tariffs are worsening inflation before they ease rates further.But tensions between the White House and the central bank over monetary policy have heightened, with Trump repeatedly denouncing Fed Chair Jerome Powell for not cutting rates. Two of the Fed Board's Trump appointees have articulated reasons for supporting a rate cut this month.

ING economists expect December to be the likely starting point for rate cuts, but it "may be a 50 basis point cut, if the evidence on weaker jobs and GDP growth becomes more apparent as we anticipate.""This would be a similar playbook to the Federal Reserve’s actions in 2024, where it waited until it was completely comfortable to commit to a lower interest rate environment," they said in a note.

Source: TradingView

AUD/USD has been cruising higher with its rising lows and highs inside an ascending channel and looks ready for a pullback.

Here are the potential support zones that could attract more buyers.

AUD/USD: 4-hour

AUD/USD 4-hour Forex Chart

Improving global trade sentiment has enabled this Aussie pair to trend higher inside a rising channel since May while the RBA’s surprise decision to hold in July gave an extra boost.

AUD/USD is hitting a ceiling at the top of its channel near R1 (.6630) while traders brace for the upcoming Australian quarterly CPI report, putting the pair in correction mode.

Can it find support at any of these Fib levels soon?

Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the Australian dollar and the U.S. dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!

The pair is testing the 38.2% retracement level in line with the pivot point (.6560) at the moment but could still be in for a deeper pullback to the 50% Fib closer to the mid-channel area of interest and the .6550 minor psychological support.

Support could also be found at the 61.8% level then S1 (.6500) that coincides with a major psychological mark, so look out for reversal candlesticks that could suggest the uptrend is ready to resume. If this happens, bulls could set sights back on upside targets at the channel top or higher.

On the other hand, long red candles closing below the channel bottom could signal that a reversal may be in order, possibly dragging AUD/USD further south to S2 (.6440) then S3 (.6370).

Whichever bias you end up trading, don’t forget to practice proper risk management and stay aware of top-tier catalysts that could influence overall market sentiment.

Source: BabyPips

What to Know:

President Donald Trump announced a preliminary US-EU trade agreement on July 27, 2025, featuring new tariffs, energy and military equipment purchases, and increased European investment in the United States.

The deal potentially stabilizes transatlantic trade, averting a trade war and influencing energy and defense sectors, though immediate effects on crypto markets remain unclear.

President Donald Trump announced a preliminary US-EU trade agreement featuring new tariffs, energy, and military purchases and increased EU investment in the US on July 27, 2025.

The agreement aims to reinforce economic ties, averting a more severe trade war. Immediate market reactions remain limited, with specific details pending further discussion and negotiations.

Trump’s Agreement Reduces Tariffs and Boosts Defense Trade

The US-EU trade agreement, introduced by President Trump, includes reduced tariffs and increased trans-Atlantic trade commitments. The deal emphasizes sectors like energy and defense, reflecting past US trade policies.

Ursula von der Leyen represented Europe's interests while major players like US-based defense companies anticipate benefits. This effort showcases the ongoing commitment to bolster economic collaboration between the regions. Jörn Fleck, Senior Director, Atlantic Council Europe Center, noted in his analysis that "The United States and Europe seem to have avoided a self-destructive trade war for now in the biggest and deepest commercial and investment relationship the global economy knows." Atlantic Council

15% Tariff on EU Goods May Increase US Exports

The deal introduces a 15% tariff on most EU goods, potentially stimulating US export growth. However, new concessions and foreign direct investments mark significant financial impacts yet to fully materialize.

The trade agreement holds potential political and social implications centered on trade stability. Experts note that this could help in mitigating economic tensions, though reactions in crypto markets remain speculative.

Historical Precedents and Future Economic Prospects

Analysts draw parallels with former US-EU trade decisions where tariffs and investments have been central themes. These moves continue to aim at strengthening bilateral economic relations. Barbara C. Matthews, Nonresident Senior Fellow, Atlantic Council, shared that "The EU deal follows the pattern of other recent agreements ... new tariffs, purchases of US energy, and increased foreign direct investment (FDI) in the United States."

Future outcomes are anticipated to entail increased bilateral investments and commerce.

Source: CryptoSlate

Beijing and Washington plan to tack another 90 days onto their trade war truce as the two countries prepare to begin another round of negotiations in Stockholm on Monday, the South China Morning Post (SCMP) reports, citing sources familiar with the matter.

This third round of high-stakes negotiations represents the latest attempt by the two countries to stabilize one of the world’s most important economic relationships. It builds on previous talks in Geneva and London, which were aimed at checking the rapid advance of tariffs and laying a foundation for a broader de-escalation of trade tensions.

According to the SCMP article, the US and China will commit not to levy new tariffs or take aggressive actions during the 90-day proposed extension. The announcement indicates that both sides want to keep talking and avoid a fresh flare-up in the tensions roiling global markets for years.

The White House has not publicly confirmed the planned truce extension, and the US administration was not immediately available for comment.

Beijing demands tariff review on fentanyl chemicals

A key new hiccup to these talks is that they extend far beyond traditional trade issues: They also involve threats to restrict exports of fentanyl, a potent and deadly synthetic opioid.

The Chinese delegation will also demand during the discussions with US officials that the Trump administration remove tariffs on components of a chemical used to make fentanyl, according to people familiar with the matter.

The synthetic opioid has been a leading driver of overdose deaths in the United States. America has blamed Chinese suppliers for adding to the crisis by shipping out precursor chemicals. In retaliation, tariffs were placed on certain chemical imports that were suspected to be in the fentanyl supply chain.

Beijing, though, says that these tariffs set back the cooperative fight to reduce illegal drug flows. Chinese officials are also likely to argue for a more collegial approach, including technical collaboration and intelligence sharing, rather than punitive tariffs.

Although the fentanyl crisis has been a significant focus for the US regarding domestic policy, it is uncertain whether the Biden trade team would agree to modify the tariff approach in the space at a time of domestic election, including amid widespread frustration with Chinese policies.

US and China pause new tariffs for 90 days

If the 90-day cease-fire that was reported comes to pass in Stockholm, it would mark a deliberate halt in one of the longest trade wars of modern times.

The US and China have levied tariffs on more than $700 billion worth of each other’s goods since 2018. The trade war disrupted supply chains worldwide, affected the agriculture and technology industries, and changed how global multinationals arrange their operations.

An interim pause, analysts say, would give businesses that have been ensnared in the crossfire for years a chance to breathe. It would also allow both sides to work on thornier long-term issues like intellectual property protection, digital trade, and forced technology transfers.

The 90-day period is not a permanent solution but a window of opportunity. Its success will depend largely on the political will of both the United States and China to move the negotiations forward or risk renewed tensions.

The timing of the Stockholm meetings is also crucial. The United States is heading into a ferocious election cycle, and neither side may want to appear as if it is soft on trade, for China, where a slowing economy and increasing pressure from domestic industries are probably fueling a more practical approach to diplomacy.

Although there is optimism about the meeting, experts warn that many core structural issues have yet to be resolved. The truce over tariffs might help defuse tensions, but it is anything but a permanent solution.

What unfolds this week in Stockholm could decide whether the world’s two biggest economies are on a path to rekindled cooperation — or merely deferring the next round of confrontation.

Source: CryptoSlate

Strategic Context and Economic Motivation

U.S. Reactions and Political Signaling

Key Sectors and Industrial Focus

Geopolitical and Economic Ramifications

The White House confirmed Sunday that the United States has finalized a new trade deal with the European Union after direct talks between President Donald Trump and European Commission President Ursula von der Leyen in Washington.

The agreement landed just ahead of the August 1 deadline that would have triggered new tariffs, ending weeks of economic tension between the two major economies. This report is based on content provided by the original briefing details shared earlier this week.

Trump said the U.S. will now impose a 15% tariff on most goods coming in from Europe, including vehicles. He described it as “a very powerful deal,” and repeatedly called it “the biggest of all the deals.”

Von der Leyen, who appeared with him, acknowledged the deal came after “tough negotiations” but said it was ultimately “a huge deal.” The two leaders stood together at the press conference, spelling out the terms and attempting to project stability after weeks of friction over trade policy.

Some goods, like aircraft, their parts, select chemicals, and pharmaceuticals, will not face the 15% tariff. Von der Leyen made it clear that these exceptions would stand, and emphasized that the new tariff rate will not stack on top of existing duties. This was a sticking point during negotiations, especially for countries like Germany and France, whose industries are heavily reliant on exports in those exempted sectors.

EU agrees to spend big in exchange for tariff cap

In return for the U.S. capping the tariff at 15% instead of the threatened 30%, the EU agreed to buy $750 billion worth of U.S. energy and also invest an additional $600 billion in the American economy. These commitments, Trump said, go beyond previous levels and will be directed at a range of sectors. He did not share any specific breakdowns or timelines.

The president also claimed that the EU will be “purchasing hundreds of billions of dollars worth of military equipment,” though no specific figures were disclosed. The defense side of the agreement raised eyebrows, with some officials noting that past military spending pledges from U.S. allies have often moved slowly, if at all.

Before the deal was finalized, Trump said there was only a “50-50 chance” that he and von der Leyen would strike any kind of framework. On the EU’s side, Brussels had already started preparing for a collapse.

Lawmakers had approved a counter-tariff package aimed at targeting U.S. goods and were reportedly getting ready to trigger the Anti-Coercion Instrument, known as the “trade bazooka” inside EU circles. That tool is considered a last-resort mechanism for hitting back against economic pressure from major global players.

Ireland and Germany respond, numbers reveal scale

Irish Prime Minister Micheál Martin welcomed the agreement, saying it “brings clarity and predictability” to the U.S.-EU trade relationship. His office, however, warned that the higher tariffs would “make trade more expensive and more challenging.” The Department of the Taoiseach said the agreement still represented a step toward “a new era of stability,” but one that comes with clear trade-offs.

German Chancellor Friedrich Merz responded with cautious support, focusing on what the deal means for the auto industry. He pointed out that the previous 27.5% tariff rate on cars had now been “almost halved,” and called the quick adjustment “of great significance” to Germany’s export-focused economy. Germany had been pushing hard for car tariff relief throughout the talks.

The broader U.S.-EU trade relationship is massive. In 2024, total trade in both goods and services between the two hit 1.68 trillion euros, which is around $1.97 trillion. While the EU ran a surplus in goods trading, it recorded a deficit in services, leading to an overall surplus of 50 billion euros with the U.S. last year. The shift to a 15% tariff structure is expected to have a major effect on that balance, especially for sectors that rely on consistent cross-border flows like machinery, autos, and pharmaceuticals.

Source: CryptoSlate