Art of the (bad) deal: How the EU's Trump trade pact hits defence, energy, food and pharma

Euractiv

4 days ago

Barely a day after Ursula von der Leyen signed a trade pact with Donald Trump, it looks less like she averted a trade war and more like she surrendered in one. While the deal immediately avoids the prospect of 30% US blanket tariffs being slapped on the bloc's products next month, it will still make tariffs an undeniable status quo in trade ties across the Atlantic as a less onerous, but still stinging, levy of 15% on everything from cars to wines comes into force.
If you find yourself asking where the wins are for the continent's businesses in the deal closed in Scotland on Sunday, the bloc's trade chief, Maroš Šefčovič, says there's more than just commerce at stake. It remains crucially unclear whether the EU can even deliver on some of its promises.
Euractiv breaks down the most puzzling parts:
Energy
The EU would make 'significant purchases of US LNG, oil and nuclear fuels,' von der Leyen said – taking a page from her predecessor Jean-Claude Juncker who made the same pledge to Trump back in 2018.
However, a senior Commission official admitted on Monday that "it is not the European Union that buys this energy." The deal for the EU to buy an extra $250 billion worth of US energy each year has already been mocked by most of the energy commentariat, as this would mark a nearly fivefold increase on the $64 billion the bloc imported from the US last year.
Meanwhile, not all European refineries are keen to work with even larger quantities of American crude because of its distinctive chemical composition.
When Juncker charmed his US counterpart with promises to import large bounties of LNG, the ploy worked – Trump focused his ire on the Russian Nord Stream 2 pipeline instead. It remains to be seen whether Brussels can get away with a similar strategy again.
When asked on Monday whether he feared US retaliation once the jig was up, trade supremo Šefčovič dodged the question.
Health
On the pharmaceutical front, von der Leyen caused confusion on Sunday by stating that EU products were included in the EU-US deal, implying that they would be subject to 15% tariffs.
However, a senior Commission official clarified on Monday that pharmaceuticals are exempt from the 1 August deadline. Nevertheless, there is a high possibility of US tariffs due to the ongoing Section 232 investigation by the US administration into whether foreign pharmaceutical products pose a national security risk. A similar investigation is also ongoing for semiconductors.
The Commission has now said that if tariffs are imposed, they will not exceed 15%. However, this is something Trump has not publicly guaranteed. Another contentious issue is von der Leyen's pledge of €600 million in investments in the US, which didn't come with any kind of plan.
Several MEPs, including members of her own political group the European People's Party, told Euractiv that von der Leyen has no mandate to commit to investments on behalf of the private sector.
Lastly, many view the investment pledge as contradictory to the EU's ongoing efforts to retain pharmaceutical production within the bloc and to resist pressure from Trump to relocate operations to the US.
Agriculture and food
As part of the agreement, Brussels is removing trade barriers on US agricultural imports like soy and nuts – deemed non-sensitive, while also sweetening the deal with an extended lobster clause.
While the US will likely keep selling lobster to European diners duty-free, European food will still face a 15% blanket import tariff to the US with no plans to exempt any specific EU products. In response, Brussels is now trying to protect two major exports, spirits and wine, from the fallout.
An EU official confirmed that negotiations on alcoholic drinks are ongoing and insisted that they 'stayed firm on agriculture' during the talks.
So far, there aren't any clear agri-food wins for the EU.
Defence
Defence trade between will remain tax-free, Trump said.
It is, however, unclear at this stage whether steel and semiconductor chips, which are subject to tariffs, will also be exempt if destined for use in defence equipment production, hence not entirely answering the industry's questions on the tariffs' impact.
While Trump said on Friday that Europeans will purchase "vast amounts" of US weapons, arms purchases are not part of Sunday's tariffs agreement.
The reason is that the Commission, which negotiated the tariffs, has no authority over how EU capitals manage arms procurements using their national budgets. This remains a matter of national sovereignty and EU capitals already have billions of euros worth of air defence systems and other armaments on order.
Tech
Despite the Commission's own admission that the EU will likely fail to hit its target of producing a fifth of the world's semiconductors by 2030, von der Leyen served Trump a big political win on the chips.
EU-made semiconductors will face a 15% tariff under the deal, while European chip-making equipment – critical for the production of the most advanced AI chips by US chip giant Nvidia – will remain tariff-free.
This arrangement benefits US producers while hurting European businesses. Notably, the EU is home to ASML, a Dutch company that is the world's sole supplier of extreme ultraviolet lithography machines, which are essential for producing artificial intelligence chips.
Reporting by Angelo Di Mambro, Aurélie Pugnet, Nikolaus J. Kurmayer, Sarantis Michalopoulos, Sofia Sanchez Manzanaro, and Théophane Hartmann.
(jp, cs)