The US and EU have announced a new trade agreement. The EU will eliminate tariffs on all US industrial goods and provide special access for US seafood and agricultural products. Furthermore, the EU will buy $750 billion worth of US liquefied natural gas (LNG), oil, and nuclear products. Additionally, EU companies plan to invest $600 billion in key US industries by 2028.

US Tariff Implementation and EU Legislation

At the same time, the US will impose a 15% tariff on many EU imports, including cars, pharmaceuticals, and semiconductor chips. If the EU enacts laws to lower tariffs, the US will cut tariffs on cars and related parts. A senior US official mentioned that relief on automobile tariffs might happen in a few weeks if the EU introduces the necessary legislation. This agreement is a basic framework and not a final deal, allowing for further talks in the months ahead. This deal offers a clear chance to boost US energy and industry while impacting specific EU exporters. It’s wise to consider investing in US energy companies, especially in the LNG sector, using call options to take advantage of the $750 billion procurement plan. This demand builds on a rising trend we’ve seen since late 2023, with US LNG exports to Europe hitting record highs of over 12 billion cubic feet daily.

Opportunity in Auto Sector Volatility

The new 15% tariff on European cars creates immediate excitement in the market. We anticipate significant pressure on automakers like Volkswagen and BMW, making put options appealing to profit from a potential drop in their stock prices. We’ve seen this strategy work before, during the 2018-2019 period, when similar tariff threats caused big declines and increased volatility in these same stocks. A key short-term event to watch is the EU’s potential introduction of tariff reduction legislation, which could happen in a matter of weeks. We should be ready to quickly adjust our positions, either closing bearish ones or opening short-term bullish positions on EU car stocks when that news arrives. This is a trade driven by specific events, where timing your moves will be crucial. We should also assess the negative effects on other sectors, such as EU pharmaceuticals and semiconductors. Buying puts on major EU chipmakers like ASML could serve as a good hedge, as a 15% tariff will hurt their competitiveness in the vital US market. These companies already faced challenges in 2025, and this news will likely heighten investor concerns. From a currency standpoint, this agreement is favorable for the US dollar and unfavorable for the euro. The combination of large energy purchases and investments flowing into the US, along with tariffs on EU goods, should strengthen the dollar. We anticipate that the EUR/USD pair, currently around 1.08, may break below important support levels in the coming weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now