President Trump July 27 announced a trade deal with the European Union that would set 15% tariffs, as the August 1 deadline he set as the end date for suspension of additional country-specific tariff rates on countries with which the US has large trade deficits and trade barriers approaches. "We are agreeing that the tariff straight across for automobiles and everything else will be a straight-across tariff of 15%," the President said after meeting with European Commission President Ursula von der Leyen in Scotland, CNN reported. He further said of the EU agreement, "It's the biggest of all the deals."

"President Trump said that the European Union had agreed to purchase $750 billion of American energy … " the New York Times reported, adding that like other preliminary trade deals announced by the Administration, the EU agreement was not fully detailed. "The two sides also agreed to drop tariffs to zero on a range of goods, including aircraft, plane parts, certain chemicals, certain generic drugs, semiconductor equipment and some agricultural products, Ms. von der Leyen said."

The Wall Street Journal reported, "The terms disclosed on Sunday suggest that 15% is likely a new minimum tariff level for most American trading partners."

Commerce Secretary Howard Lutnick said on Fox News yesterday that August 1 is a hard deadline for the tariffs and there will be no blanket continuation of the suspension originally announced April 9 and re-upped on July 7. "So, 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," he said. "Obviously, after August 1, people can still talk to President Trump. I mean, he's always willing to listen. And between now and then, I think the president's going to talk to a lot of people. Whether they can make him happy is another question, but the President's definitely willing to negotiate and talk to the big economies for sure."

Congress — This is the last planned week in session for the Senate until September — the House has already left for the August recess — and while there are no must-do items on the agenda, there continue to be signals about how the two parties may be able to work together to keep the government funded when members return from the August recess. There is a government funding deadline on September 30, Congress will almost certainly need to enact a temporary continuing resolution to extend government funding, and that will require the support of Democrats to clear the 60-vote threshold in the Senate.

Republicans intend to act on another GOP-only reconciliation bill later this year to address items left out of the "One Big, Beautiful Bill Act" (Public Law No. 119-21), which House Speaker Mike Johnson (R-LA) sees being completed "late in the fall." The Speaker didn't offer any new details on Meet the Press yesterday, but did push back on the notion that the OBBBA cut Medicaid. The next effort is seen as likely to propose barring states from using their own funds to provide Medicaid to illegal immigrants. Tax provisions knocked out of the OBBBA due to the Byrd rule include third-party litigation reform and private school voucher provisions. There have also been comments by members and staff about increasing the Section 199A passthrough deduction to 23% as the House version of the OBBBA proposed.

Lawmakers also must decide whether to allow the Affordable Care Act's enhanced Premium Tax Credits to expire at the end of the year. The tax credits reduced premiums for individuals above 100% of the federal poverty level who purchase coverage on the exchange marketplaces. This is a traditionally Democratic issue but there is pressure on Republicans to extend the credits, which could be a major issue in the midterm elections. Punchbowl News July 27 reported Ways and Means Chairman Jason Smith (R-MO) as saying there will not be a "flat extension" of premium tax credits, citing their cost and lack of income limits.

"When it comes to these bipartisan packages, I say everything's on the table. But people are going to have to prove the viability of something like that. $400 billion. No Republican has ever voted for it," he said. The report said, "Still, Smith is pushing for a broader bipartisan tax, trade and health care package to pass by December." Chairman Smith also said tax-writers could revive the Section 899 retaliatory tax regime removed from the OBBBA following a G7 agreement if other nations don't comply with the agreement or charge new levies that lawmakers deem too punitive.

Bipartisan priorities that could be considered in a package this year include:

• tax extenders like the Work Opportunity Tax Credit (WOTC)
• the gambling deduction 90% limitation in the OBBBA, which is opposed by members on both sides and cited by Chairman Smith as something both parties want to fix before it takes effect in 2026
• retirement provisions toward a potential SECURE 3.0 package
• health care extenders
• trade programs like the African Growth and Opportunity Act that expires at the end of September

There are also proposals on cryptocurrency tax issues and Taiwan tax relief legislation held over from the last Congress.

Field hearings — While there has been a flurry of speculation about follow-on legislation, Republicans are taking the opportunity to use the recess to promote the benefits of the OBBBA to voters. The Ways and Means Committee held OBBBA-related field hearings July 25-26, in Las Vegas and at the Ronald Reagan Presidential Library in Simi Valley, CA. After focusing on the more Nevada-specific issues of the no tax on tips provision and a desire to undo the 90% limitation gambling deduction during the first hearing, Chairman Smith more broadly touted the benefits of the OBBBA in an opening statement at Saturday's hearing.

The NYT reported July 25, "even as Republicans called attention to the selling points of the bill, which they backed almost unanimously this month, the event pointed to the challenges of pitching legislation that public surveys show is deeply unpopular. It came at the start of a five-week-long summer House recess that could be a prime opportunity for the G.O.P. to promote its marquee legislative achievement. But Republicans are also keenly aware of the political risks of holding freewheeling gatherings with voters that could devolve into gripe sessions about the law."

Appropriations — The Senate last week took a step toward a bipartisan appropriations process with a strong vote in favor of a procedural motion related to consideration of a Military Construction-Veterans Affairs appropriations bill, but efforts to add other appropriations measures are complicating the process.

Democrats are reluctant to cooperate with the appropriations process given the rescissions package cleared by Congress in mid-July and the potential for more to be proposed by the Administration. The partisan tension has been apparent for weeks and well-reported, but the conflict in recent days is playing out between Senate Appropriations Committee Chair Susan Collins (R-ME) — whose panel typically works in a more bipartisan fashion, no matter which party is in the majority, than House appropriators — and the Administration, particularly OMB Director Russell Vought, who is driving the effort for more rescissions.

A story in the July 26 Washington Post said that even some Republicans are concerned the White House will ask Congress to approve more rescissions while members are trying to reach agreement on new funding, and the situation could result in a government shutdown. Appropriations Chair Collins said "she had encouraged Vought over the weekend to seek more spending cuts through the bipartisan appropriations process, rather than another rescissions package that Democrats would never support. 'I don't see the need for additional rescissions to be sent up by the White House,' Collins said."

The WSJ reported July 27, "instead of settling into a job that traditionally shaped the contours of America's budget, Collins is immersed in a full-blown public battle, one that pits her against her own party's White House and the cost-slashing officials who occupy its budget office." The OMB is "really pushing the limits of what the executive can do without the consent of the legislative branch," Collins said in the report.

The Senate returns to session today (Monday, July 28) with votes in relation to Nuclear Regulatory Commission and Department of Defense nominees this evening. On Thursday, July 31, the Senate Finance Committee is holding a hearing on the nomination of Derek Theurer, who currently serves as Counselor to the Secretary of the Treasury, to be Deputy Under Secretary of the Treasury for Legislative Affairs, as well as nominees for a USTR position and two HHS posts.

Tuesday, July 29 is the EY Webcast, "The 'One Big Beautiful Bill Act': key international tax provisions."

With Congress departing for the August recess, What to Expect in Washington won't be published regularly, but other WCEY Alerts will be issued as events warrant.