The European Union (EU) and the United States (US) finalised a major trade agreement on 28 July 2025. The deal introduces a 15% tariff on most EU exports to the U.S. market. This tariff is a significant increase for most goods in key sectors like automotive and machinery. Additionally, it mitigates the threat of a much steeper 30% tariff in early August.
European Commission President Ursula von der Leyen said the agreement brings “stability and predictability” for EU exporters. She acknowledged that while a 15% tariff is significant, it reflects the best result under current geopolitical tensions. Her remarks followed weeks of intense negotiations between EU and U.S. trade officials.
Before the deal, U.S. tariffs on EU exports averaged around 2%, varying by sector, according to World Trade Organisation (WTO) data. However, the new flat rate was considered a compromise to prevent an escalating trade war. Markets responded quickly.
Despite short-term volatility, analysts suggest the deal may offer longer-term stability. Still, some industries fear the tariff burden will weaken EU competitiveness globally. Others argue that the agreement creates a predictable baseline for future transatlantic trade talks.
SWISS STOCKS TUMBLE AFTER TRUMP’S 39% TARIFF
On 31 July 2025, President Trump announced a 39% import tariff on Swiss goods, effective 7 August 2025. This tariff will directly impact Swiss luxury brands like Swatch and Richemont, leading to higher costs and weakening demand.
Pharmaceutical companies Novartis and Roche will also face increased pressure to reduce drug prices in the U.S. Following the announcement, the Swiss franc weakened against the U.S. dollar, and major Swiss stock indices opened lower.
Meanwhile, the Swiss-American Chamber of Commerce called the tariff move “disappointing” but expressed hope for a future resolution.
MARKET REACTION: EURO SLIDES, US FUTURES CLIMB
The euro did not appreciate against the US dollar in July 2025. The exchange rate showed a slight depreciation. The euro began the month with a high of approximately $1.1810 on 1 July 2025 and ended the month at around $1.15788, with an average rate for the month of approximately $1.15863.
The South African Rand (ZAR) equivalent of these values is not included as exchange rates fluctuate daily.
The S&P 500 did not lose ground in the days following a major deal. The S&P 500 showed strong performance throughout July, rising by 2.2% over the month and posting its third consecutive month of gains.
While there was some volatility and a slight downturn at the very end of the month, the overall trend was positive, driven by strong corporate earnings, particularly in the technology sector, and a generally improved economic outlook.
The EU and US did reach a trade agreement in late July 2025. The EU made political commitments to invest $600 billion (R11.4 trillion) in the United States by 2028 and to purchase $750 billion (R14.25 trillion) worth of American energy products through 2028, with the specific intent of reducing dependency on Russian energy supplies.
These figures represent political agreements and anticipated private-sector involvement, not legally binding contracts.
Yields on European government bonds did not decline following the trade deal. Throughout July 2025, eurozone government bond yields, including the German 10-year bund, generally drifted higher.
This spike was attributed to a broadly positive growth sentiment in the Eurozone and an improving economic outlook. This rally occurred despite the European Central Bank (ECB) keeping interest rates stable in July.
POLITICAL FALLOUT: EU LEADERS DIVIDED OVER CONCESSIONS
German Chancellor Friedrich Merz welcomed the trade deal, stating that it prevented a “needless escalation” in transatlantic trade relations.
However, German industry groups, such as the German Association of the Automotive Industry (VDA), expressed concern that the 15% tariff would harm Germany’s export economy, costing the industry billions annually.
Hungarian Prime Minister Viktor Orban criticised von der Leyen, calling the deal “worse than the UK’s”. French Prime Minister Francois Bayrou labelled it a “dark day” for EU sovereignty. Analysts warn the bloc may face lasting reputational and economic damage from the concessions.
WILL THE EU TRADE DEAL ENSURE STABILITY OR FUEL INVESTOR DOUBT?
Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 11.
Subscribe to The South African website’s newsletters and follow us on WhatsApp, Facebook, X and Bluesky for the latest news.
