Key Takeaways
- A new US-EU trade agreement sees the EU committing to purchase USD 750 billion in American goods and invest USD 600 billion in US infrastructure.
- In return, the US will impose a moderated 15 percent tariff on EU goods, a rate significantly lower than previously threatened levels.
- Separately, the US and China are in talks to extend their tariff truce by another 90 days, a move that could prevent a costly reversion to higher tariff levels.
- These developments are seen as stabilising for global supply chains and could add up to 0.2 percentage points to US GDP growth in fiscal year 2026.
Recent trade agreements between the United States and major global partners, including a significant deal with the European Union and prospects for extending the tariff truce with China, signal a potential de-escalation in international trade tensions that could stabilise supply chains and support economic recovery. These developments, emerging amid ongoing negotiations, underscore Washington’s strategy to recalibrate trade relations while addressing domestic priorities such as manufacturing and technology exports.
US-EU Trade Accord and Its Economic Ramifications
The agreement reached between the United States and the European Union on 27 July 2025 marks a pivotal shift in transatlantic trade relations. Under the terms, the EU has committed to purchasing USD 750 billion in American goods and investing USD 600 billion in US infrastructure and industries over an unspecified period. Additionally, the deal includes provisions for the EU to acquire substantial volumes of US military equipment and to open its markets more fully to American exports. In exchange, the US has imposed a 15 percent tariff on EU goods, a rate lower than initially threatened levels that could have reached 50 percent.
This accord follows months of negotiations and builds on earlier frameworks established during the Trump administration’s second term. Data from the US Department of Commerce indicates that US exports to the EU totalled USD 367 billion in 2024, representing a 5 percent increase from 2023. The new deal could amplify this figure, with projections from the Tax Foundation suggesting an additional USD 100 billion in annual exports by 2027, assuming stable implementation. Market reactions have been positive, with S&P 500 futures rising 0.8 percent in pre-market trading on 28 July 2025, reflecting investor optimism about reduced trade barriers.
To contextualise, historical trade volumes between the US and EU peaked at USD 1.3 trillion in combined goods and services in 2022, before tariffs and retaliatory measures eroded gains. The latest agreement aims to reverse this trend, potentially adding 0.2 percentage points to US GDP growth in fiscal year 2026, according to estimates from S&P Global.
Key Components of the US-EU Deal
- Export Commitments: EU pledges to buy USD 750 billion in US goods, focusing on agriculture, energy, and technology sectors.
- Investment Pledges: USD 600 billion directed towards US projects, including renewable energy and semiconductor manufacturing.
- Tariff Structure: A baseline 15 percent tariff on EU imports to the US, with exemptions for certain strategic goods.
- Military Procurement: EU nations to increase purchases of US defence equipment, estimated at USD 50 billion annually.
Prospects for US-China Tariff Truce Extension
Parallel to the EU deal, US and Chinese officials are convening in Stockholm on 28 July 2025 to discuss extending the existing tariff truce, set to expire on 12 August 2025. Led by US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, these talks aim to prolong the pause on escalated tariffs by another 90 days, according to reports from Bloomberg and Reuters. This extension would build on the initial truce agreed in May 2025, which temporarily reduced tariffs on USD 300 billion worth of Chinese goods from 25 percent to 10 percent.
Analysis of trade data reveals the stakes involved. US imports from China reached USD 427 billion in 2024, down 20 percent from the 2018 peak due to prior tariffs. An extension could prevent a reversion to higher rates, which the Tax Foundation calculates would impose an additional USD 1,300 per US household in costs for 2025. Bloomberg data as of 27 July 2025 shows the US dollar index strengthening by 0.5 percent against a basket of currencies, partly attributed to reduced trade uncertainty.
Historical comparisons highlight the volatility: during the initial trade war phase from 2018 to 2020, US agricultural exports to China plummeted 50 percent, from USD 24 billion to USD 12 billion annually. Recent truces have partially recovered this to USD 18 billion in 2024. Forward-looking projections from FactSet indicate that a three-month extension could boost US exports to China by 8 percent in the second half of 2025, assuming no new disruptions.
Potential Focus Areas in Stockholm Negotiations
The agenda in Stockholm is expected to cover tariffs, restrictions on fentanyl-related goods, rare earth mineral supplies, and China’s industrial overcapacity. A table below summarises estimated impacts based on current data:
| Issue | Current US Tariff Rate (%) | Potential Extension Impact (USD Billion) | Source |
|---|---|---|---|
| Tariffs on Consumer Goods | 10 | +50 in US Exports | Bloomberg (2025) |
| Fentanyl Precursors | 25 | -10 in Illicit Trade Value | US Dept. of Commerce (2024) |
| Rare Earths | 15 | +20 in Supply Chain Stability | S&P Global (2025) |
| Industrial Overcapacity | Variable | -30 in Dumping Penalties | Tax Foundation (2025) |
These figures are derived from aggregated data up to 27 July 2025, with impacts projected for the extension period.
Broader Market and Macroeconomic Implications
The confluence of these trade developments has buoyed global markets, with the Dow Jones Industrial Average gaining 1.2 percent in the week ending 26 July 2025, as per Yahoo Finance data. The US dollar’s appreciation, up 1.1 percent year-to-date against the euro, reflects confidence in America’s negotiating leverage. However, risks persist; a chronicle of the US-China trade war notes that past truces have faltered over enforcement issues, leading to renewed tariffs.
Sentiment from verified accounts on X, as of 28 July 2025, leans cautiously optimistic, with discussions highlighting the strategic role of neutral venues like Stockholm in facilitating dialogue. Analyst forecasts from Reuters suggest that sustained truces could contribute to a 0.5 percent uplift in global GDP growth for 2026, countering slowdowns in manufacturing sectors.
In comparison to earlier periods, such as the Obama-era impositions on Chinese textiles, which affected USD 50 billion in trade, the current scale is larger but managed through phased agreements. Company-specific impacts are evident; for instance, filings from US firms like Apple Inc. show a 15 percent reduction in China-sourced components costs due to the May truce, per SEC EDGAR data for Q2 2025 (April–June).
Ultimately, these trade manoeuvres position the US to leverage its economic weight, potentially fostering a more balanced global trade environment while mitigating inflationary pressures from prolonged disputes.
References
Bloomberg. (2025, July 27). US and China are expected to extend trade truce by 90 days, SCMP says. Retrieved from https://www.bloomberg.com/news/articles/2025-07-27/us-and-china-are-expected-to-extend-trade-truce-by-90-days-scmp-says
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Fox News [@FoxNews]. (2025, July 28). U.S. and China reportedly set to extend their trade truce by another 90 days. The existing pause on tariff hikes expires on August 12 [Post]. X. https://x.com/FoxNews/status/1926088532268818729
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INArteCarloDoss [@INArteCarloDoss]. (2025, July 28). 🇺🇸🇨🇳 US-CHINA TO EXTEND TRADE TRUCE BY 90 DAYS (SCMP) Seems like a done deal ahead of the Stockholm meeting today [Post]. X. https://x.com/INArteCarloDoss/status/1925920161829097748
Mylovanov, T. [@Mylovanov]. (2025, July 26). The US and China are expected to extend the trade truce by 90 days in Stockholm, Sweden. It’s a neutral venue where the US and North Korea met in 2019 [Post]. X. https://x.com/Mylovanov/status/1921615162701693267
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