U.S. President Donald Trump and European Commission President Ursula von der Leyen announced a trade deal Sunday that eased trade tensions between the economic powerhouses before an August 1 deadline set by Trump. Although questions remain over the plan’s details and feasibility, the deal provides stability for businesses and avoids a worst-case scenario.

Under the deal, the U.S. will impose a 15% tariff (tax) on most goods imported from Europe, with some categories exempted and potentially higher tariffs on European steel and aluminum. The European Union (EU) will also commit to buy $750 billion in U.S. energy ($250 billion per year over three years), buy U.S. weapons, and invest $600 billion in the American economy, over an unspecified time frame.

Further details of the deal remain unclear. Neither the U.S. nor the EU has released text of the agreement, and EU officials said Monday some details were still being negotiated. Furthermore, comments by Trump and von der Leyen on the substance of the deal did not entirely agree on the details they did divulge.

However, the virtue of Sunday’s trade deal announcement was its timing. Earlier this month, President Trump postponed his “Liberation Day” tariff rates for a second time, in hopes of reaching deals with major U.S. trading partners. The new deadline was Friday, August 1. Even if there are details to work out, announcing the deal sends a public signal to public officials and businesses alike that the EU has escaped those higher rates.

A trade deal with the EU is more consequential than any of the other trade frameworks Trump has negotiated thus far (the U.K., Vietnam, Japan) because it amounts to striking a trade agreement with 27 nations at once. According to the World Bank, EU nations combined for a GPD of $19.42 trillion in 2024 (compared to $29.18 trillion for the U.S. and $18.74 trillion for China), effectively making the EU the world’s second-largest economy.

In his remarks Sunday, President Trump complained that the mammoth market of Europe is “essentially closed” to American goods, particularly automobiles.

However, it turns out that the European mega-economy proves to be America’s biggest trading partner. In 2024, the U.S. exported $370.2 billion in goods to the EU and imported $605.8 billion in goods. (Exports and imports of services to the EU are also measured in billions of dollars, but the U.S. Trade Representative does not offer figures more recent than 2022). For comparison, here is the value of trade in goods with other top American partners:

• Mexico: $334.0 billion exports, $505.9 billion imports
• Canada: $349.4 billion exports, $412.7 billion imports
• China: $143.5 billion exports, $438.9 billion imports
• Japan: $79.7 billion exports, $148.2 billion imports
• The U.K.: $79.9 billion exports, $68.1 billion imports

Thus, a U.S.-EU trade deal keeps tariffs low on a huge market.

The greatest question mark concerning the deal — as it has been announced so far — regards the European commitment to purchase an annual $250 billion in American energy for three years. The motivation is sound; European countries currently rely on Russian oil and gas and are eager to find an alternate supplier due to the war in Ukraine. The European Parliament is currently considering plans to ban the import of Russian gas by January 2027. Rather, the question is whether this volume is possible.

Reuters analyst Clyde Russell crunches the numbers to estimate that the EU will import $328.0 billion in seaborne crude oil ($236.6 billion), liquefied natural gas (LNG) ($40.1 billion), and coal (used in steel production) ($51.3 billion) in 2025. In 2024, the EU imported $64.6 billion in crude oil, LNG, and coal from the U.S., or approximately 26% of its total. If the EU increased its imports of American energy to $250 billion, that would constitute approximately 85% of its total energy imports.

Russell notes the possibility of trade in other types of energy, including nuclear and refined fuels, but argued these would not substantially change the totals. The EU imported $10.9 billion worth of diesel fuel from the U.S. in 2024. Russell also neglects to factor in crude oil imported from Russia by pipeline, which amounts to about half the crude oil Europe imports by sea; if the EU cut off all Russian oil imports, it would be in the market to buy significantly more American oil.

While European demand would reshape global energy markets, Russell argues that the greater bottleneck is American supply. In 2024, total U.S. exports of crude oil, LNG, and coal came to $165.8 billion, he calculates, well short of the value needed by the EU. In the short term, the only way American energy producers could sell $250 billion worth of fuel to Europe is by exporting more energy from domestic markets and increasing energy imports to make up the difference. President Trump is passionate about expanding American energy production, but doing so in any significant volume will take years.

This is not to criticize the strategic wisdom of American energy to Europe, only to note that the figure of $250 billion in annual U.S. exports may be a bit too ambitious.

Reactions to the terms of the trade deal were mixed. Reuters’ Clyde Russell calls the energy terms “delusional” — which seem a rather harsh assessment. French Prime Minister François Bayrou characterized the deal as the EU submitting to Trump, making it “a dark day.” Perhaps he can take this as a cautionary tale about the consequences of surrendering national sovereignty to an international institution.

The Wall Street Journal editors seemed ambivalent, suggesting that “much” of what the EU agreed to, in terms of investing in the U.S. economy and purchasing American energy, “would have happened anyway.”

However, the most significant takeaway is that the U.S. has avoided a trade war with the EU, as the WSJ editors noted. Under Trump’s “Liberation Day” tariff framework, the EU faced tariffs as high as 30%, and it had prepared retaliatory tariffs on American products; those tariffs, in turn, may have provoked further hikes from Trump. Thus, while U.S. tariffs on the EU will rise slightly from the current level of 10%, they could have gone much higher. Even more importantly, the announcement now provides businesses with greater certainty about what tax rates between the U.S. and the 27 EU countries will be, allowing them to make better decisions and press “go” on further investments.