EU accepts 15% US tariff cap

Before Trump's trade war, European goods entered the United States with import taxes of 2-5%. The Turnberry Agreement, approved by the European Parliament's trade committee on 2 June, changes the bargain: Europe removes all tariffs on American industrial goods. The US, in return, caps tariffs on European exports at 15%.

For Malta, this is EU trade policy doing what it often does: turning a distant negotiation into domestic economic pressure. The island is not Germany's car belt, but it sits inside the same single market. When Brussels gives up tariff leverage, Maltese firms, importers and consumers live with the consequences.

The agreement makes the trade relationship permanently worse for Europe. The EU gave up every tariff it had to buy a ceiling three to six times higher than pre-2018 rates. The calculation was defensive. Trump had threatened 25% or more, so 15% was treated as the smaller loss. Whether that is still true is the question.

What Europe agreed to

The agreement was negotiated between Commission President Ursula von der Leyen and Trump at his Scottish golf resort in July 2025. It covers most industrial products. American machinery, electronics and chemicals enter Europe duty-free. European equivalents going to the US face a flat 15%.

The EU also committed to buying more American liquefied natural gas (LNG) and to encouraging European investment in US industry. The precise scale of those pledges remains contested.

Steel and aluminium are excluded. They stay at 50% under US national-security tariffs, a legal route that lets the president bypass normal trade rules by declaring imports a threat to national defence (Council of the EU, 20 May 2026).

Parliament added conditions. EU tariff cuts begin only after Washington moves first. If the 50% metal tariffs are not reduced by the end of 2026, the Commission can suspend the whole arrangement. The deal expires at the end of 2029 in any case.

Trade committee chair Bernd Lange called it "not a good deal." German Chancellor Friedrich Merz said it was "the best that could be achieved." Both positions can stand. The deal is worse than what existed before, but a full trade war would cost more.

Where the costs land

German carmakers take the hardest hit. The auto tariff rises from 2.5% to 15%, a sixfold increase. Germany shipped roughly 409,000 vehicles to the US in 2025 (Stern). The Center Automotive Research in Bochum estimates the increase costs German car production about €2.5 billion a year (Handelsblatt).

The burden is uneven even inside the sector. Porsche and Audi, which have no US factories, absorb the full 15%. BMW and Mercedes, with assembly plants in America, can shift production and avoid part of the cost.

That creates a quiet incentive. The deal nudges firms to move more manufacturing to America, weakening Europe's industrial base over time. For smaller EU economies such as Malta, the risk is indirect but real: a poorer European manufacturing base means weaker demand, thinner supply chains and less room for the single market to absorb shocks.

German industry groups have been blunt. The BDI, Germany's federation of industries representing the country's largest manufacturers, the VDA auto industry association, and the VDMA mechanical engineering group all warn that the deal weakens European competitiveness without securing adequate concessions.

The ifo Institute and the IfW Kiel, two of Germany's leading economic research centres, point to a lasting structural disadvantage for exporters that depend on access to the US market.

A one-way street

American producers get tariff-free access to Europe's 450-million-person market. European producers pay 15% to reach America. On steel and aluminium, they pay 50%.

European food and drink exporters face the same wall. French wine, Italian specialty goods and Irish whiskey all sit at the full 15%, with no route to exemption. Agricultural trade was simply left outside the negotiation. American farm products get improved access to Europe. European food going to the US gets nothing in return.

That matters in a country where imported food, drink and industrial inputs pass quickly from wholesale prices to the shop shelf. Malta may not be the headline loser in this agreement, but it is exposed to the same price and supply effects as the rest of the EU, with less domestic production to cushion them.

The real test comes in December. Washington has seven months to lower the 50% metal tariffs, or the EU can suspend its concessions. The problem is leverage. By early May, Trump was already floating 25% auto tariffs, above the deal's own ceiling.

If the Commission triggers the suspension clause, it risks the escalation the agreement was designed to avoid. Europe's only credible exit threat is also the outcome it most wants to prevent. The deal will hold only as long as nobody decides to test that threat.