The US -EU Tariff ‘agreement’: A look at key legal challenges
On 27 July 2025, European Commission President Ursula von der Leyen and US President D Trump agreed a deal on tariffs and trade which the EU continues to work with the US to finalise.
This uniform 15% tariff is to apply to most EU-origin goods imported into the United States that are currently subject to reciprocal tariffs and replaces both standard Most Favoured Nation (MFN) rates and any additional or punitive duties previously imposed by the U.S. It is to extend to key sectors, including automotive products, pharmaceuticals, and semiconductors. (Although, the final tariff treatment of pharmaceuticals and semiconductors remains contingent on the outcome of ongoing Section 232 national security investigations). This
Because of this trade framework agreement the Commission announced on 4 August that it will suspend by 6 months the EU’s countermeasures against the US, which were due to enter into force on 7 August . These were an extensive package of retaliatory measures the European Commission had formally adopted in response to U.S. tariffs on EU goods in April of this year.
With potentially significant changes ahead, in tariffs and trade we take a look at some of the key legal impact and ramifications.
The European Stage
Although the European Commission holds the exclusive mandate to negotiate trade agreements on behalf of the EU, the final agreement will still require approval by the individual Member States through established EU ratification procedures.
Why is this?
This is an international agreement between the EU and the US and covers areas under exclusive EU competence, such as customs and trade policy. It could also be seen to include matters which fall under a shared or national competence. This is then known as a ‘mixed agreement’ and because of this split, both the EU and its Member States must ratify the agreement for it to be fully binding.
This includes measures of council authorisation, European Parliamentary consent and each Member State ratifying the agreement in accordance with its own constitutional procedures.
How long this will take is yet to be seen. Initial reactions from Member States have been mixed. There are concerns, including from the French prime minister, François Bayrou, who called it a “dark day when an alliance of free peoples, united to affirm their values and defend their interests, resolves to submit”. The Chancellor for Germany; Friedrich Merz worried about “severe damage” to the German economy, however, welcomed the deal as a step back from a potentially more harmful trade conflict, raising the possibility of delays, further negotiations, or amendments before the agreement can be fully ratified and implemented.
Given the fluid nature of the negotiations, businesses involved in trade between the EU and US will need to remain attentive, as the final terms and their operational implications may continue to shift in the weeks ahead.
The World Stage
From the world trade law perspective, the EU may challenge the tariffs at the World Trade Organisation (WTO) based on them being non-discriminatory or disproportionate.
In particular, the imposition of a 15% EU-specific tariff raises a fundamental legal issue of violating the Most Favoured Nation (MFN) principle. Under Article I of the GATT 1994, WTO members must grant all other members the same trade benefits. Imposing 15% only on EU goods (but not others) discriminates and violates this principle, unless it justified by an exception. Such justified exceptions would include, amongst others, the tariff being based on safeguarding, anti dumping duties, a retaliatory tariff authorised by the WTO Dispute Settlement Body (WSB) or protecting national security.
The U.S. has not invoked any justification, which may expose it to WTO challenges from the EU or other affected members.
The US Stage
The authority under US trade law to impose the tariffs stem from executive authority, purportedly under the International Emergency Economic Powers Act (IEEPA). phOHOWBER THE However, this position has recently been called into question in the case discussed below, where the court raised significant concerns relating to the U.S. Constitution and the separation of powers.
Case Analysis On May 28th 2025 a significant decision was issued with far-reaching implications for U.S. trade policy, The case concerned the “Liberation Day” tariffs. These were announced by the Trump Administration in early 2025 and imposed a 10% tariff on nearly all imported goods, regardless of origin and additional, higher tariffs targeting select countries including Mexico, Canada, China, and several EU states. The US Court of International Trade struck down the Trump Administration’s “Liberation Day” tariffs, ruling them unlawful and beyond the scope of presidential authority. The case, V.O.S. Selections, Inc. v. United States, was brought by five small businesses—V.O.S. Selections, FishUSA, Genova Pipe, MicroKits LLC, and Terry Precision Cycling. They demonstrated they had suffered severe economic harm from the tariffs, including increased costs, disrupted supply chains, and competitive disadvantages. The Legal Challenge Under the IEEPA, the President of the United States is granted specific but limited powers to deal with unusual and extraordinary threats to the national security, foreign policy, or economy of the United States; when those threats come from outside the U.S. The President had invoked the IEEPA to justify the action of imposing tariffs across the board, arguing that trade deficits constituted a national threat warranting emergency intervention. The plaintiffs, represented by the Liberty Justice Center, a public interest law firm, argued that: · The IEEPA does not authorise tariffs, especially across-the-board tariffs on non-hostile nations. What would be required would be a situation which amounts to an ‘unusual and extraordinary threat’. The trade deficits, although long standing, are not such a situation. · Even if it was an economic emergency, the authority on tariffs lies with Congress, not the President and this amounted to an unconstitutional delegation of Congress’s power to regulate trade. Thus, it would be unconstitutional and the action violated the U.S. Constitution’s separation of powers. The court made the unanimous decision that: · The IEEPA law itself was not invalidated. Instead, it said the law should be looked at within narrow limits to ensure the President would in no way violate the Constitution. By doing this, the Court made it clear that only Congress has the power to create broad trade rules or set tariffs and not the President acting alone.
In terms of the constitution the court was concerned with its nondelegation doctrine. The nondelegation doctrine is a principle imbedded in U.S. constitutional law which states that: Congress cannot give away (or “delegate”) its core lawmaking powers to other branches of government, especially the executive branch, without clear limits or guidance. Congress makes laws and sometimes the President has the power to enforce those laws. The nondelegation doctrine is meant to ensure Congress provides clear instructions when delegating that power to ensure new policies or laws are not created without clear authority from Congress. The administration’s actions thus exceeded the statutory limits and posed serious constitutional concerns under its doctrine. As a result, the Court issued a permanent injunction prohibiting the enforcement of the tariffs. The case is currently on appeal with the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit stayed the lower court’s ruling and until the Federal Circuit resolves the appeal, the tariffs remain enforceable.
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Real-World Impact
The case brought into sharp focus how unchecked executive power in trade policy can directly harm small businesses and the broader economy, thus aside from its potential impact on the EU and US tariff agreement, this decision is especially relevant for importers, small-to-medium enterprises (SMEs), exporters, and manufacturers who have faced rising costs and supply chain disruptions due to sudden tariff policies. It also underscores the need for clear statutory guidance and constitutional boundaries in the exercise of emergency economic powers.
Although the final outcome remains to be seen, for businesses and legal practitioners alike, it serves as a reminder that even in times of economic tension, the rule of law—and the proper role of each branch of government remains paramount.
This article is for informational purposes only and does not constitute legal advice. For tailored guidance, please contact your legal advisor or a member of the Jurisglobal Trade and International Law team.
August 2025
Jurisglobal Law Group
