The US has struck a framework trade agreement with the European Union, imposing a 15 per cent import tariff on most EU goods – half the threatened rate – and averting a bigger trade war between the two allies that account for almost a third of global trade.

US President Donald Trump and European Commission President Ursula von der Leyen announced the deal at Trump's luxury golf course in western Scotland after an hour-long meeting that pushed the hard-fought deal over the line.

"I think this is the biggest deal ever made," Trump told reporters.

He lauded EU plans to invest some $600 billion in the United States and dramatically increase its purchases of USenergy and military equipment.

Trump said the deal, which tops a $550 billion deal signed with Japan last week, would expand ties between the trans-Atlantic powers after years of what he called unfair treatment of USexporters.

Von der Leyen, describing Trump as a tough negotiator, said the 15 per cent tariff applied "across the board", later telling reporters it was "the best we could get".

"We have a trade deal between the two largest economies in the world, and it's a big deal. It's a huge deal. It will bring stability. It will bring predictability," she said.

Trump said the EU had agreed to buy some $750 billion worth of US energy and invest $600 billion more than it already is in America, as well as making a major purchase of military equipment.

“We are agreeing that the tariff straight across for automobiles and everything else will be a straight across tariff of 15 per cent,” Trump said. “We have a tariff of 15 per cent. We have the opening up of all of the European countries.”

Ursula von der Leyen and Donald Trump in Scotland. – Reuters

German Chancellor Friedrich Merz welcomed the deal, saying it averted a trade conflict that would have hit Germany's export-driven economy and its large auto sector hard. German carmakers, VW, Mercedes and BMW were some of the hardest hit by the 27.5 per cent US tariff on car and parts imports now in place.

Italy's Prime Minister Giorgia Meloni said it was "positive" a trade deal had been reached, but added that she needed to see the details.

"I consider it positive that there is an agreement, but if I don't see the details I am not able to judge it in the best way," Meloni said.

Italy is one of the biggest European exporters to the US, with a trade surplus of more than €40 billion.

The Italian government, led by a nationalist coalition, had urged its European partners to avoid a direct clash between the two sides of the Atlantic.

In a statement, Meloni said that the agreement "ensures stability", adding that the 15 per cent "is sustainable, especially if this percentage is not added to previous duties, as was originally planned".

"We are ready to activate support measures at the national level, but we ask that they also be activated at the European level for sectors that will be particularly affected by US tariff measures," she added.

Italian Prime Minister Giorgia Meloni speaks on the trade deal. – Reuters

Von der Leyen said the rate also applied to semiconductors and pharmaceuticals, and there would be no tariffs from either side on aircraft and aircraft parts, certain chemicals, certain generic drugs, semiconductor equipment, some agricultural products, natural resources and critical raw materials.

Trump initially appeared to suggest pharmaceuticals would not be covered, but a senior administration official later confirmed to reporters that the tariff deal applied to pharmaceuticals.

Officials also said EU leaders had accepted that the US would keep its 50 per cent steel and aluminium tariff in place while the two sides continue to discuss it.

"We will keep working to add more products to this list," von der Leyen said, adding that spirits were still under discussion.

For months, Trump has threatened most of the world with large tariffs in hopes of shrinking major US trade deficits with many key trading partners. More recently, he had hinted that any deal with the EU would have to “buy down” the currently scheduled tariff rate of 30 per cent.

During his comments before the deal was announced, he pointed to a recent US agreement with Japan that set tariff rates for many goods at 15 per cent and suggested the EU could agree to something similar.

Asked then if he would be willing to accept tariff rates lower than that, Trump said “no”.

Their meeting came after Trump played golf for the second straight day at his Turnberry course, this time with a group that included sons Eric and Donald Jr. The president's five-day visit to Scotland is built around golf and promoting properties bearing his name.

The European and US trade delegations in Scotland. – Reuters

Joining von der Leyen were Maros Sefcovic, the EU’s chief trade negotiator; Björn Seibert, the head of von der Leyen's Cabinet; Sabine Weyand, the commission's directorate-general for trade, and Tomas Baert, head of trade and agriculture at the EU's delegation to the US.

The US and EU seemed close to a deal earlier this month, but Trump instead threatened the 30 per cent tariff rate. The deadline for the Trump administration to begin imposing tariffs has shifted in recent weeks but is now firm, the administration insists.

“No extensions, no more grace periods. August 1, the tariffs are set, they’ll go into place, Customs will start collecting the money and off we go," US Commerce Secretary Howard Lutnick said. 

He added, however, that even after that “people can still talk to President Trump – I mean, he’s always willing to listen”.

Without an agreement, the EU said it was prepared to retaliate with tariffs on hundreds of American products, ranging from beef and auto parts to beer and Boeing airplanes.

Trump retains the ability to increase the tariffs in the future if European countries do not live up to their investment commitments, a senior US administration official told reporters on Sunday evening.

A US official said the tariff rate on commercial aircraft would remain at zero for now, and the parties would decide together what to do after a US review is completed, adding there is a "reasonably good chance" they could agree to a lower tariff than 15 per cent. No timing was given for when that probe would be completed.

Further EU approval needed

In the meantime, there will be work to do on other fronts. Von der Leyen had a mandate to negotiate because the European Commission handles trade for member countries. But the Commission must now present the deal to member states and EU lawmakers, who will ultimately decide whether or not to approve it.

Before their meeting began, Trump pledged to change what he characterised as “a very one-sided transaction, very unfair to the United States”.

"I think both sides want to see fairness,” the Republican president told reporters.

Von der Leyen said the US and EU combined have the world's largest trade volume, encompassing hundreds of millions of people and trillions of dollars and added that Trump was “known as a tough negotiator and dealmaker".

“But fair,” Trump said.

The art of the deal

Here are the main elements of the deal:

• Almost all EU goods entering the US will be subject to a 15 per cent baseline tariff, including cars, which now face 27.5 per cent, as well as semiconductors and pharmaceuticals. The 15 per cent tariff is the maximum tariff and is not added to any existing rates.
• However, the US is to announce the result of its 232 trade investigations in two weeks and decide separately on tariff rates for chips and pharmaceuticals. Whatever US decisions come later on these sectors will be "on a different sheet of paper", European Commission President Ursula von der Leyen said.
• The US and EU will have zero-for-zero tariffs on all aircraft and their components, certain chemicals, certain generic drugs, semiconductor equipment, some agricultural products, natural resources and critical raw materials. More products would be added. The situation for spirits is still to be established.
• Tariffs on European steel and aluminium will stay at 50 per cent, but von der Leyen said these would later be cut and replaced by a quota system.
• The EU pledged to make $750 billion in strategic purchases, covering oil, gas, nuclear, fuel and chips during Trump's term.* Under the deal, the EU pledged to buy US military equipment and European companies are to invest $600 billion in the US over the course of Trump's second term.