EU and Ukraine reach agreement in principle on modernised agricultural trade as tariffs are reinstated

On June 6, 2025, the European Union reintroduced tariffs and quotas on Ukrainian agricultural goods, putting an end to the three-year unprecedented tariff-free access to the EU market initiated in response to Russia’s invasion of Ukraine in 2022.

As Ukraine’s Black Sea shipping routes were blocked, Autonomous Trade Measures (ATMs) regime suspended all outstanding customs duties and quotas under Title IV of the EU-Ukraine Association Agreement (Deep and Comprehensive Free Trade Area, DCFTA), which has been in force since 2016.

This allowed Ukraine to redirect much of its export volume to the EU market, accounting nearly 60% of total export in 2024. This temporary trade liberalization for agriculture and industrial goods has been prolonged twice since its initial introduction, with emergency brakes and safeguard measures implemented to address any significant disruption to the EU market or the market of a Member State caused by Ukrainian imports.

Although the Council of the European Union has adopted a regulation to extend the suspension of EU import duties and quotas on iron and steel products imported from Ukraine until 5 June 2028, the trade in agricultural sector has returned to the pre-war quotas, now set at 7/12 of annual volumes for the remainder of 2025, resetting the original trade conditions of DCFTA.

The decision to suspend trade liberalization for the agricultural sector was influenced by a number of protests across Central and Eastern Europe and unilateral bans on Ukrainian grains. Although the Ukrainian agricultural sector is a rather complementary one for the EU, it has a comparative advantage partly due to lower production costs, which some EU farmers perceive as a competitive threat.

Indeed, farmers in Poland and Hungary have been highly concerned about the impact of large imports of lower-cost Ukrainian goods on the depreciation of local ones. In 2024, Poland’s trade deficit with Ukraine in the agri-food sector reached €600 million.

Although the chairperson of the Ukrainian Economic Affairs Parliamentary Committee, Dmytro Natalukha, is worried that the termination of the ATMs regime could cost Ukraine over €3 billion, which is equivalent to 70% of total economic growth for 2025, the Commission argues the value is closer to €1.5 billion due to inflation.

For Ukraine, this is not merely an economic disruption,but has a direct impact on funding the war effort. Agriculture represents a much larger share of Ukraine’s economy than it does in the EU as every seventh Ukrainian works in the agricultural sector, and failure to secure a solution could result in Ukrainian GDP drop.

“Ukrainian companies have shifted their markets toward the EU. If exports decrease, tax revenues drop, those same taxes that fund our military,” Ukrainian MP Yevheniia Kravchuk told Euronews.

There are ongoing negotiations between the EU and Ukraine on a new multiannual trade agreement, which is expected to be more favorable to Ukraine’s agricultural sector compared to the current trade restrictions.

Initially, the European Commission postponed the drafting of the new trade agreement until after the presidential elections in Poland and Romania, in order to avoid fueling farmers’ protests that could have influenced electoral outcomes. Following the elections, negotiations officially started on June 2, 2025. The European Parliament highlighted that the EU aims for a more balanced trade relationship, incorporating lessons learned and ensuring a stable agreement that balances European farmers’ and Ukrainian producers’ interests. June 30, 2025, the EU and Ukraine have reached an agreement in principle on the review of the trade liberalisation provisions under the Association Agreement, contributing to the gradual integration of Ukraine into the EU’s Single Market.

According to Ursula von der Leyen, this modernised agreement is to secure trade flows from Ukraine to Europe and global markets, building resilience and economic solidarity amid Russia’s unjustified war. At the same time, the Union would safeguard farmers’ interests, while remaining committed to mutual growth, stability, and full integration of Ukraine.

The modernized agreement is built on three key pillars. First, new market access is tied to Ukraine’s gradual alignment with EU production standards, including animal welfare, pesticide use, and veterinary medicines, with annual progress reporting, reflecting Ukraine’s EU accession path. Second, a robust safeguard clause allows either side to take protective measures if imports cause adverse effects. Third, the agreement balances support for Ukraine’s trade with the EU while addressing sensitivities in certain agricultural sectors. Market access increases modestly compared to the original DCFTA for sensitive products like sugar, poultry, eggs, wheat, maize, and honey, is enhanced for complementary goods, and full liberalization applies to some non-sensitive items.

The EU and Ukraine are working on the final details of the agreement, which is expected to be made public by the end of July 2025. Meanwhile, in order to minimize economic losses and stabilize export, Ukraine also intends to reduce raw material exports and increase domestic processing capacity to export higher value-added products, e.g., sunflower oil instead of seeds.

This strategy is supposed to help mitigate the impact of the quota system, as well as facilitate post-war recovery and Ukraine’s alignment with EU standards, transforming the export structure and increasing the competitiveness of Ukrainian goods and services. The goal should be achieved by launching a government-backed financial support mechanism for exports and refining existing financial tools, enhancing the quality of trade, expanding business access to educational services and establishing export and development institutions.

Tags: tariffs, Ukraine, export, European Union, Black Sea, quotas, agricultural goods, Market, duties