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CNBC
6 hours ago
- Business
- CNBC
Trump's EU trade deal is based on massive energy purchases that are unlikely to materialize, analysts say
President Donald Trump's massive energy deal with the European Union will be difficult to implement, setting Washington and Brussels up for a potential future confrontation over tariffs and trade. The EU has agreed to purchase $750 billion of U.S. energy and invest $600 billion in the U.S. by 2028, according to the White House. In exchange, Trump has agreed to a tariff of 15% on EU goods excluding steel and aluminum, which is half the 30% rate that he had threatened. But the $600 billion investment in the U.S. is not binding on EU member states or companies. The European Commission, the bloc's executive body, simply said that companies "have expressed interest in investing at least" that amount in the U.S by 2029. The massive energy purchases in the deal are unrealistic due to market and political constraints, analysts said. The EU cannot force member states and companies to buy U.S. energy just as the Trump administration cannot force producers to sell to Europe, said Mathieu Utting, an analyst at Rystad Energy. "This is non-binding. It's a pledge," said Erik Brattberg, an expert on Europe at the Atlantic Council, a think-tank with a focus on international affairs. "The EU itself doesn't buy energy. It would be member states or companies from member states." A White House official told CNBC on Tuesday that Trump expects the EU to abide by its commitments under the deal. "That is what the EU agreed to purchase," the official said. "The President reserves the right to adjust tariff rates if any party reneges." The energy purchases are divided into $250 billion annual installments over the rest of Trump's term, European Commission President Ursula von der Leyen told reporters Sunday. The EU is pledging significant purchases U.S. oil, liquified natural gas (LNG) and nuclear fuel to replace Russian fossil fuels, von der Leyen said. But it is unclear how much EU member states and companies intend to buy of each fuel type. "Details have to be sorted out and that will happen over the next weeks," von der Leyen told reporters. EU member states bought about $80 billion U.S. oil, liquified natural gas, liquified petroleum gas and coal from the U.S. in 2024, according to data from Kpler. The bloc would have to triple its purchases of U.S. energy to meet the $250 billion annual purchase target laid out in the agreement. "If this deal were to be realized, we'd be talking about the United States providing the lion's share of European energy imports," Helima Croft, head of global commodity strategy at RBC Capital Markets, told CNBC on Monday. EU energy imports totaled $433 billion in 2024, according to Eurostat. Increasing U.S. oil exports to the EU is difficult because production is flat and will likely decline in the coming months, said Svetlana Tretyakova, an oil analyst at Rystad. U.S. companies would have to reroute exports from customers in Asia and Latin America to the EU, Tretyakova said. Importing more oil also does not align with the EU's climate goals and the continent's refining capacity is declining, she said. Surging LNG exports is also tough, Utting said. U.S. terminals always run at full capacity so there isn't slack capacity to increase shipments to the EU right now, he said. As in the case with oil, LNG would have to be diverted from other customers to Europe, he said. More LNG capacity is coming online over the next two years that could be exported to Europe, he said. But the EU already receives more than half its imports from the U.S., Utting said. "It's very unrealistic that Europe would import exclusively from the U.S.," he said. "They will want to diversify to some extent." While the headline $750 billion figure is unrealistic, the EU is showing that it is serious about expanding its energy trade with the U.S., said Alex Munton, director of global gas and LNG research at Rapidan Energy. The EU was already planning to eliminate what remains of Russian LNG and pipeline gas imports to the bloc by 2028. This will create a supply gap of 25 million metric tons per year that the U.S. is perfectly positioned to fill, Munton said. "The interests line up, they go hand in hand," he said. "That's why it's essentially a convenient deal."
Spectator
9 hours ago
- Automotive
- Spectator
Germany isn't happy about the EU-US trade deal
The US-EU trade deal has been given a lukewarm reception in Europe. Although the agreement between US president Donald Trump and the president of the European Commission Ursula von der Leyen is merely a framework, rather than a full-trade deal, there are already major concerns on the continent, especially in Germany – a country famously reliant on exports. German chancellor Friedrich Merz did not seem too pleased with the deal, negotiated by his party colleague von der Leyen. 'I'm not satisfied with the result in the sense that (it was said) this is good as it is,' Merz stated. 'Which, in plain terms, means the German economy will suffer significant damage.' Trump certainly seems to be the big winner from the deal which was thrashed out during the president's trip to Scotland. The EU has agreed to purchase £558 billion in US energy, and will also up overall investment in the US by £459 billion. 'We will replace Russian gas and oil with significant purchases of US LNG, oil and nuclear fuels,' said von der Leyen. No wonder Trump was smiling. Jens Südekum, an advisor to Germany's finance minister Lars Klingbeil, suggested the agreements on energy would strengthen the American, rather than the German, economy. It's clear to see why. The response from industry representatives, especially those speaking for German car manufacturers or the national steel and aluminium industry, was even more downbeat. Importers bringing EU cars to the US face tariffs of 15 per cent. Even though the rate of 27.5 per cent imposed by Trump in April has nearly been halved, the consequences for the likes of Volkswagen and BMW are likely to be severe. German car manufacturers must surely now increase prices in order to balance the books. The prospect of being effectively forced into moving production from Europe to the United States is also looming. Volkswagen stated that it will decide whether it ought to expand its engagement in the US market once the final agreement is on the table. Meanwhile, VDA, the German car manufacturers trade organisation, predicts that a rate of 15 per cent could 'cost the German automotive industry billions annually.' The steel industry has voiced similar concerns, even though the specific rates for exports into the US are yet to be determined. 'As long as steel tariffs are enforced at a rate of 50 per cent, the consequences for exports from Germany and the EU towards the USA are dramatic,' said Kerstin Maria Rippel from WV Stahl, the trade association for Germany's steel industry. When the agreement – billed as the largest trade deal in history – was announced on Sunday, there was some optimism that further escalation between Europe and the United States had been avoided. However, after the dust settled, the verdict is less optimistic. French prime minister, François Bayrou, labelled the framework deal a 'dark day' for the EU. Industry leaders soon pointed out the damage that Germany, but also the EU, is now facing. 'Who is awaiting a hurricane, is thankful for a thunderstorm,' Wolfgang Große Entrup, representative of the trade association of Germany's chemical industry, concluded. Is a bad deal better than no deal? Germany, and the rest of the Europe, is about to find out. It is true that the US would have likely imposed a general tariff of 30 per cent on the first day of August, had Trump and von der Leyen not announced a first agreement in Turnberry. But this doesn't mean the EU has won: the outline of the anticipated deal leads to the conclusion that the US has triumphed at the negotiating table. Europe could pay a big price for its weakness in dealing with Trump.
New Statesman
10 hours ago
- Business
- New Statesman
Trump's gangsterism towards the EU is working
Photo by Thierry Charlier/AFP In 2018, when Donald Trump threatened to impose tariffs on European cars, then-president of the European Commission, Jean-Claude Juncker, responded: 'We can also do stupid.' When Trump then imposed steel and aluminium tariffs, the EU responded by targeting Harley-Davidson motorbikes and bourbon. It wasn't long before the two economic blocs agreed to put further tariffs on hold. It was a different time. Juncker, of course, was cut from a different cloth from today's Commission president Ursula von der Leyen and many of the current European leaders. He had not danced the night away in Berlin in November 1989, as the Wall fell, and was not too inclined to believe in teenage ideas such as the end of history or America as a force for good in the world. He knew, as former French president François Mitterrand once put it, that between America and Europe there is a bloody economic war going on at all times, and there has been one for more than a century. But let us be fair to von der Leyen. There is another difference between today and 2018: the war in Ukraine. For all the pablum about how the war has awakened Europe from its geopolitical slumber, the truth is very different. The war has made Europe entirely dependent on the US — even as it continues to pay for most of the war expenses — because of the belief that without American weaponry Ukraine would sooner or later be defeated. It is a wonderful position for Donald Trump to be in. He can effectively threaten Ukraine with a tragic defeat and the EU with the consequences of such an outcome by simply allowing the withdrawal of all support for Kyiv to hover above the economic negotiations. 'What a nice country Ukraine is,' he says ominously to Europeans, 'it would be terrible if something happened to it.' There are no economic discussions taking place at the moment; rather, it's the logic of military force supplanting every economic discussion. The gangsterism has been effective. Terribly effective in fact as evidenced by the bizarre deal announced by von der Leyen over the weekend: for the privilege of paying tariffs of 15 per cent to export to the American market, the EU will reduce its own tariffs and prepare significant transfers of funds to the US energy and defense industries, themselves an informal part of the American state. I have to confess I have never seen a trade deal quite like this one where European concessions were seemingly exchanged for… more European concessions. It's a catastrophic outcome for a series of reasons. First, more than any other crisis in my lifetime, the deal undermines the very raison d'etre for the European Union. If the EU is after all too weak, too divided, too timid to defend European interests on the global stage, what exactly is it for? The individual states can surely be weak on their own. Second, while European leaders have often expressed their distaste for the kind of politics Donald Trump represents, they are also the best possible argument for Trump: after all, if he can extract significant tribute from wealthy European societies, in a way his predecessors could not, why should Americans vote for anyone else? And in fact, after the deal was announced, social media was flooded by Maga accounts celebrating a victory, even turning it into a battle of the sexes, with von der Leyen coming out defeated and humiliated. Good job, everyone in the Berlaymont, you made us proud. Subscribe to The New Statesman today from only £8.99 per month Subscribe Third, the deal is a disaster for the European economy. We saw the impact the day after the announcement: investment banks are revising their growth forecasts for Europe and the euro fell steeply against the dollar. This is particularly hard to take because it reverses very positive dynamics after Trump returned to the White House and global investors started to look at Europe as a more predictable place to park their money. Why should they do that now that exports to the US market may fall by about 30 per cent as a result of the tariffs and investment in European technology looks doomed with the necessary funds going to buy American weapons and natural gas instead of European weapons and wind turbines. Note how the deal determines that Europe continues to subsidise the military industrial complex in North Virginia instead of investing in its own military technology. Such investment would help Ukraine survive, but it would also reduce Europe's vulnerability and create a level playing field for transatlantic relations. That's the last thing Trump wants. This deal is disastrous on its own terms and doubly disastrous for creating the conditions for many similar deals in the future. The irony is that Europeans spend an enormous amount of time discussing among themselves why their economies are falling behind the boisterous US economy. One American company, Nvidia, may soon be worth more than the 50 largest European companies. What explains this? Might it be an excess of regulation, as Mario Draghi likes to say? A taste for la dolce vita? Too much wine? Too much espresso? Perhaps Europeans lack the entrepreneurial drive of Americans, the typical justification of every colonised mind and yet not uncommon in parts of Europe. What a mystery. Unless, of course, it has something to do with Europe's extreme vulnerability and America's willingness to use its unmatched military power to shape economic outcomes. Yes, it might be that. [Further reading: The plot against Zohran Mamdani] Related
Yahoo
12 hours ago
- Automotive
- Yahoo
To avoid worst of Trump tariffs, E.U. accepted a lopsided deal
BRUSSELS - The tariff-and-spending accord announced Sunday by the United States and the European Union stands to avert a damaging trade war between two of the world's largest economies, but it is lopsided in favor of President Donald Trump's protectionist policies, with Brussels swallowing bitter concessions in hopes of stabilizing a relationship that is vital not just economically but also for security interests. The rough agreement - which allows Washington to raise tariffs on E.U. goods while the Europeans promise to buy more U.S. products - quickly came under sharp criticism in Europe. Despite feisty rhetoric and vows to stand up to Trump, E.U. leaders largely acquiesced to the U.S. leader's ever-changing demands. Subscribe to The Post Most newsletter for the most important and interesting stories from The Washington Post. E.U. negotiators insisted the deal was the best way to avoid a highly damaging tit-for-tat trade war that would benefit rivals such as China and Russia. But European officials and analysts said the tentative agreement does not end the uncertainty because so many details must still be worked out. To the harshest critics, including some in France who spoke of a 'capitulation' and 'humiliation,' the agreement is proof of a deeply unbalanced alliance and the latest example of European appeasement of Trump. At NATO, allies similarly strained to pledge the huge increases in military spending demanded by Trump. European Commission President Ursula von der Leyen, who announced the deal with Trump while sitting next to him at one of his golf resorts in Scotland on Sunday, touted 'a huge deal,' clearly playing to Trump's love of largeness. But at her news conference soon after, von der Leyen appeared far more sober, declaring the 15 percent tariffs she had accepted on European automobiles to be 'the best we could get.' The E.U., and in particular Germany, its automaking powerhouse, had hoped to eliminate the 25 percent U.S. car tariffs entirely. 'We should not forget where we came from,' von der Leyen said. 'Fifteen percent is certainly a challenge for some, but we should not forget it keeps us the access to the American markets.' Trump indeed had threatened far worse, including a 30 percent across-the-board tariff that upended months of painstaking negotiations. Under the new deal, the United States will impose a 15 percent duty on most imports from the E.U. The blanket rate foisted on the E.U. mirrors a U.S. deal announced this month with Japan, another Group of Seven ally, but it is higher than the 10 percent that Britain secured earlier this year and that E.U. officials had grudgingly accepted in recent talks. Since World War II, trade agreements have largely sought to reduce the cost of buying and selling goods across borders. A 2017 deal the E.U. struck with Canada eliminated tariffs on most goods traded between them. An agreement signed with Vietnam in 2019 aims to phase out nearly all customs duties. Trump's accord with the E.U. goes in the opposite direction by raising tariffs, with some exceptions. Economists say the tariffs will increase costs for importers, who must pay the duties, and put upward pressure on inflation. Consumers and businesses will probably bear some of the extra costs, experts say. In France, where President Emmanuel Macron had urged the E.U. to take a harder line, the deal drew sharp backlash. While Macron was quiet Monday, Prime Minister Francois Bayrou said it was 'a dark day when an alliance of free people, brought together to assert their values and defend their interests, resigns itself to submission.' Von der Leyen's European Commission, the E.U.'s executive body that negotiates trade policy for its 27 member nations, had faced calls from Germany and Italy, two countries that do outsize business with the United States, for an accord that would limit damage to their export-dependent companies. But even capitals that had urged a conciliatory approach were not exactly celebrating on Monday. 'The agreement successfully averted a trade conflict that would have hit the export-oriented German economy hard,' German Chancellor Friedrich Merz said. Still, members of the European Parliament from Germany blasted the deal even as it reduced Trump's tariff on cars, one of Germany's central demands. 'My first assessment: not satisfactory; this is a lopsided deal,' said Bernd Lange, who chairs the European Parliament's committee on international trade, in a post on X. 'Concessions have clearly been made that are difficult to accept. Deal with significant imbalance. Furthermore lot of questions still open.' Dutch Prime Minister Dick Schoof acknowledged that 'no tariffs would have been better' but called the deal 'vital for an open economy like ours.' Belgian Prime Minister Bart De Wever said, 'One thing is clear: This is a moment of relief but not of celebration.' The talks laid bare the E.U.'s queasiness at using its economic muscle, one of its few areas of leverage against Washington, at a time when allies have had to calibrate repeatedly to keep Trump on board as Russia wages war in Ukraine. Ultimately, after months of mixed signals and threats from Trump, E.U. leaders said they accepted a deal to give their industries a reprieve from the uncertainty that threatened to cripple business. Officials suggested they had relented out of concern that Trump was prepared to raise tariffs to a level that would effectively halt trade between Europe and the United States. 'Let's pause for a moment and consider the alternative: A trade war may seem appealing to some but it comes with serious consequences,' said the E.U. trade commissioner, Maros Sefcovic, who shuttled to Washington in recent months for difficult talks with Trump officials. 'Our businesses have sent us a unanimous message: Avoid escalation and work toward a solution that brings immediate tariff relief,' Sefcovic told reporters Monday. He said that he and his team had traveled to Washington 10 times for a deal and that the E.U.'s calculations reached beyond trade. 'It's about security, it's about Ukraine, it's about current geopolitical volatility,' Sefcovic said. He said he couldn't go into detail on what was discussed in the room with Trump on Sunday, 'but I can assure it was not just about the trade.' Now, nearly 70 percent of European goods will face the blanket tariff, a big increase in charges, according to a senior E.U. official who spoke on the condition of anonymity to talk frankly about the details of the deal, which is still under negotiation. The E.U. had sought carve-outs from the U.S. tariff regime for key sectors including wine and spirits, and aircraft parts. The announced agreement eliminates tariffs on airplane parts, but a decision on wine and spirits was postponed. E.U. officials said talks will continue in the coming weeks. The two sides appeared to diverge on other details. The White House indicated that a 50 percent tariff on steel would remain in place, while E.U. officials said there would be further negotiations on lowering steel tariffs. Many officials and experts said it was crucial to sort out the details. 'We need to understand what is included,' said Brando Benifei, an Italian member of the European Parliament and head of its delegation for relations with the United States. Some questioned if ongoing U.S. trade inquiries by the Trump administration might still result in extra tariffs, such as on European-made pharmaceuticals, though the E.U. said those should remain capped at 15 percent under the new agreement. At first glance, Benifei said, the deal 'seems very asymmetric.' 'The result is due in my view to the push by some governments to have a deal at any cost, which has weakened our stance,' he added. 'Because the U.S. knew some governments wanted a deal whatever the cost.' Others noted that Trump's threats managed to shift the view on what constituted relief. Just a few weeks ago, E.U. and U.S. negotiators neared an agreement that involved a blanket tariff of 10 percent, before a Truth Social post by Trump derailed them. On Monday, some investors saw benefits for Europe's key auto industry, for instance, which would see U.S. car tariffs reduced to 15 percent from 25 percent. The tariffs, however, were at 2.5 percent before Trump's global trade blitz, and some industry groups noted their dismay. 'The U.S. tariff rate of 15 percent, which also applies to automotive products, will cost German automotive companies billions annually and burdens them,' said Hildegard Mueller, president of Germany's main auto industry group, the VDA. On some issues, the Europeans stood their ground. Trump officials had pressed the E.U. for concessions on tech industry regulations and on food standards, which the bloc insisted were nonnegotiable. As part of the deal, Trump said Europe had committed to buying more U.S. energy and weapons, and boosting investment in the United States. But those provisions are mostly aspirational promises without guarantees. European nations were already poised to buy more U.S. weapons under an arrangement with Trump to continue arming Ukraine, and the bloc was already seeking alternative energy sources, including liquefied natural gas from the United States, as part of its push to phase out Russian energy imports. More energy purchases and European investments would come from member states and companies that Brussels does not control. Italian Prime Minister Giorgia Meloni, seen as a close Trump ally in the E.U., heralded the deal, while saying details still need to be worked out. 'I obviously welcome the fact that an agreement has been reached,' Meloni told reporters. Still, she added, 'we need to verify the possible exemptions, particularly for certain agricultural products. So there are a number of elements that are missing.' - - - Faiola reported from Rome. Beatriz Rios in Brussels and Cat Zakrzewski in Edinburgh, Scotland, contributed to this report. 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Yahoo
12 hours ago
- Business
- Yahoo
EU-US Trade Deal Draws Mixed Reviews from Bloc's Leaders
Following President Donald Trump and European Commission President Ursula von der Leyen's announcement Sunday that the U.S. and the European Union had negotiated a trade deal (which will see EU countries subject to 15-percent tariffs), EU leaders have started weighing in on the new way forward for the transatlantic trade agreement. While von der Leyen praised the trade agreement sitting alongside Trump in Scotland, other leaders seem to have a less rosy outlook. More from Sourcing Journal EU-Funded Project Makes Lignin Breakthrough in Biobased Research EU Regulators Accuse Temu of Allowing Sale of Illegal Products US Reaches Trade Truce With EU, May Extend China Tariff Pause François Bayrou, France's prime minister, expressed his disappointment for the trade agreement. 'It is a dark day when an alliance of free peoples, united to affirm their values and defend their interests, resolves to submission,' Bayrou wrote on his X account. Still, other major leaders said the agreement helped divert what could have been a much more serious threat to countries in the 27-member bloc and their respective businesses. Giorgia Meloni, Italy's prime minister, told reporters Sunday at a press briefing in Ethiopia that while she still needed to 'study the details' of Trump and von der Leyen's deal, it's promising that the two nations came to an agreement, noting that 'trade escalation between Europe and the United States would have had unpredictable and potentially devastating consequences.' German Chancellor Friedrich Merz shared a similar sentiment. 'This agreement has succeeded in averting a trade conflict that would have hit the export-orientated German economy hard,' he said in a statement. Trump had previously threatened a 30-percent tariff on goods inbound to the U.S. from EU countries; last week, he stated that the U.S. had 'a 50-50 chance of making a deal with the EU.' That von der Leyen—who had originally fought to see a 10-percent flat tariff rate on most EU goods—kept up negotiations with a frustrated Trump can be considered a win, some EU leaders, including Portuguese Prime Minister Luís Montenegro, believe. 'The EU-U.S. trade agreement brings predictability and stability, vital for Portuguese companies and the economy. It avoids escalation but places new demands on the pursuit of more trade agreements, the reduction of barriers, and the transformative agenda of simplification and cost reduction,' Montenegro wrote in an X post. Maroš Šefčovič, EU trade commissioner, called on both parties to 'keep strengthening our transatlantic ties,' thanking U.S. Trade Representative Jamieson Greer and U.S. Secretary of Commerce Howard Lutnick for their collaboration on the newfound agreement. Some leaders in the EU continue to focus their attention on a free trade environment. Bart De Wever, prime minister of Belgium, called Sunday's understanding 'a moment of relief but not of celebration.' 'I sincerely hope the United States will, in due course, turn away again from the delusion of protectionism and once again embrace the value of free trade—a cornerstone of shared prosperity,' he wrote in an X post. Petteri Orpo, prime minister of Finland, said this agreement should not mark the end of future trade discussions between the bloc and the U.S. 'Work must continue to dismantle trade barriers. Only free transatlantic trade benefits both sides the most,' Orpo wrote in a translated X post. The Trump administration doesn't appear amenable to the prospect of free trade with almost any country across the globe. Much of the president's economic strategy has been built around negotiating new trade deals that guarantee U.S. access to other markets, and bolstering American manufacturing across a variety of industries he sees as key to the country's future success. While Trump heralded last week's deal with Japan as 'the largest deal ever made,' the agreement with the EU has the propensity to impact myriad industries, including fashion and apparel. A lower-than-threatened tariff will see U.S. companies importing European goods—like luxury apparel, footwear and leather—paying less than some may have expected. Still, any increase in cost per unit could deal a blow to companies already struggling to reach price-conscious consumers. According to data from 7thonline, U.S. retailers have shown anxiety about their ability to absorb price hikes brought on by tariffs. Just over one-third of retailers said the only way they could avoid price hikes is with a 0-percent tariff increase, and a further 43 percent said the highest tariff increase they could afford to absorb was 25 percent. Sign in to access your portfolio
