EU-US trade deal: Brussels settles — but at what price? – DW – 07/28/2025

DW

28-07-2025

European stock markets rose to 4-month highs after Donald Trump's trade deal with the EU. Investors are cheering the easing of uncertainty, but some fear Brussels conceded too much, which could haunt the bloc for years.
European governments and firms breathed a collective sigh of relief after the US-EU trade deal was sealed on Sunday, following nearly four months of tariff uncertainty.
Markets reacted positively: shares in European automakers jumped as much as 3% at Monday's opening, while broader EU stock indices reached four-month highs. European bond yields fell, signaling investor optimism that transatlantic trade tensions may be easing.
Under the agreement, a 15% US tariff will be levied on most exports from the European Union, and the bloc will commit €514 billion ($600 billion) in investment to the US — its largest trading partner. Tariffs on some sectors have yet to be finalized
While the new 15% rate is less severe than the 25% tariff imposed on European automakers in April and the 30% levy previously scheduled for August 1, it still represents a sharp increase from the 2.5% duty in place before US President Donald Trump's second term began.
European Commission President Ursula von der Leyen told reporters that the new tariff rate was "a good deal," adding it would return "stability" and "predictability" to transatlantic trade. She cautioned, however, that "15% is not to be underestimated, but it is the best we could get."
German Chancellor Friedrich Merz echoed that sentiment, calling the agreement a means to "preserve our core interests" and avert "an unnecessary escalation in transatlantic trade relations." Yet he admitted disappointment over the outcome, stating, "I would have very much wished for further relief."
To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video
While EU policymakers maintain they succeeded in negotiating Trump down from harsher tariffs, many European political and business leaders have condemned the new deal as damaging to the 27-member bloc. The EU had originally sought a 10% tariff.
Hungarian Prime Minister Viktor Orban offered a biting critique during a Facebook livestream, saying: "Trump ate Ursula von der Leyen for breakfast, adding that the deal is "worse" than the one the United Kingdom clinched in May.
Under that deal, most British exports still face a blanket 10% US tariff, while economists have warned the US-UK agreement lacks depth and leaves key sectors — like pharmaceuticals and agriculture — exposed.
French Prime Minister Francois Bayrou called the deal a "dark day," lamenting how the EU, "an alliance of free peoples, brought together to affirm their common values and to defend their common interests, resigns itself to submission."
Former high-profile European lawmaker Guy Verhofstadt, meanwhile, labeled the deal "scandalous" and a "disaster." In comments on X, he decried the lack of "a single concession from the American side" and criticized the EU's "poorly negotiated" approach.
German MEP Bernd Lange, who chairs the European Parliament's trade committee, wrote on X that the deal was "lopsided" and that Brussels had made concessions that were "difficult to accept."
French entrepreneur Arnaud Bertrand called the deal "a one-way transfer of wealth," adding that "it rather looks like the type of unequal treaties that colonial powers used to impose in the 19th century — except this time, Europe is on the receiving end."
Ruben Staffa, foreign trade expert at the German Institute for Economic Research (DIW Berlin), said the deal marks "almost a tenfold increase in the average tariffs that applied before Trump's second term."
The deal helps the EU sidestep a full-scale trade war that could have severely disrupted business confidence and consumer spending on both sides of the Atlantic.
In anticipation of steeper US tariffs, Brussels had prepared €72 billion in retaliatory measures on American imports, including levies targeting aircraft and automobiles.
Additional options reportedly included export restrictions on certain steel and chemical products, as well as possible moves against US services — particularly in Big Tech and finance — where the US holds a €109 billion trade surplus with the EU.
While far from ideal, the agreement's economic impact is expected to be relatively mild. Citing data from the Kiel Institute for the World Economy (IfW), German business daily reported Monday that the tariffs would mean a 0.1% hit to the EU's gross domestic product (GDP).
This is much lower than last year's Goldman Sachs estimate of a GDP cut of up to 1% in the event of a much lower 10% US tariff.
Some sectors stand to benefit. Bloomberg Intelligence forecasts a €4 billion boost in earnings for the European auto sector, thanks to the reduction in vehicle tariffs from 27.5%.
However, German firms are bracing for a substantial cost: estimates the new levies will burden them with €6.5 billion in additional expenses.
Despite averting a trade war, Brussels has faced criticism for failing to extract more substantial concessions from Washington.
Analysts argue the EU missed key opportunities to secure reciprocal tariff cuts on high-value European exports — including wine, spirits, and luxury goods.
Some suggest that placing restrictions on US tech giants and financial institutions might have pressured Trump to lower tariffs on autos and pharmaceuticals.
Critics also point to Brussels' early retreat from its retaliatory tariffs, which they say weakened the bloc's negotiating leverage.
Others note that EU leaders failed to capitalize on US domestic politics — such as targeting exports from Republican strongholds or encouraging US companies to lobby the Trump administration from within.
Internal divisions among EU member states, notably from Hungary, further fractured Brussels' position.
Meanwhile, Trump's unpredictable tactics and aggressive tariff threats kept EU negotiators on the back foot throughout the talks.
The deal is a preliminary framework rather than a comprehensive agreement. Over the coming months, negotiators from Brussels and Washington will draft a detailed text and set a date for the 15% tariff to take effect.
Given Trump's track record of last-minute demands, as seen in US-Japan trade talks, the EU must brace for potential revisions.
The deal requires approval from EU member states and scrutiny from the European Parliament, a process likely to span several weeks.
Meanwhile, the Trump administration faces nearly a dozen lawsuits challenging the legality of his tariff policy, arguing that Trump lacks congressional authority to impose them unilaterally. Should any of these succeed, the tariffs could be voided, triggering fresh negotiations.
Key sector-specific levies also remain unresolved. Brussels is still pushing for exemptions on wine and spirits — especially vital for France and Italy. Lower rates on pharmaceuticals and semiconductors are also under discussion.
Finally, the EU's pledge to ease nontariff barriers — such as regulatory complexities and VAT hurdles — will require careful negotiation to ensure alignment with existing EU standards.