The European Union and United States recently announced negotiations for a massive trade agreement. This new agreement, which focuses largely on energy procurement, has a whopping $750 billion value. European Commission President Ursula von der Leyen and U.S. President Donald Trump celebrate a new agreement. This agreement will be a major step forward in deepening economic ties between the United States and Europe. Ever since it emerged from the drawing board, analysts have expressed doubt that the ambitious energy purchase targets are achievable.
The good news is that the European Commission says that companies are ready to invest at least $600 billion in the U.S. Much of that investment is projected to happen by 2029. This figure, though large, is still non-binding for the EU member states or companies. Rather, it acts as a promise, but not an actual enforceable investment promise. The new announcement clarifies that the energy purchases will be made in yearly installments of $250 billion. That plan will unfortunately unfold over the rest of Trump’s term.
In order to meet the ambitious annual target, the European Union would need to triple its current purchases of U.S. energy. This unprecedented jump brings with it a number of questions. Second, we need to be realistic about the state of the market and overall U.S. production capacity.
European Commission President Ursula von der Leyen highlighted the importance of this agreement. We still have to work through the specifics, and that’s going to happen over the next several weeks. Both sides are understandably excited by the deal, but they are a long way from out of the woods, needing to still perfect terms.
Market analysts such as Alex Munton, director of global gas and LNG research at Rapidan Energy, have flagged serious concerns. They contend the $750 billion number turns heads but is never a realistic expectation to shoot for. He emphasized that those interests are complementary and mutually reinforcing. At the same time, he warned them not to get ahead of themselves with unrealistic forecasts.
Helima Croft, head of global commodity strategy for RBC Capital Markets, laid out some of the difficulties involved in increasing U.S. oil exports to the EU. She cautioned that with flat production levels it is not hard to imagine a drop in the months ahead. Svetlana Tretyakova, an oil market analyst at Rystad, confirmed these feelings, adding that reaching the new targets may become a challenge.
Market dynamics are increasingly clouded by tariff implications. According to a White House official, President Trump will reserve the right to change tariff rates if either side reneges. This sets up even more layers of ambiguity and uncertainty to the deal.
His colleague from Europe, Mathieu Utting, expressed doubt that Europe can plan on U.S. imports alone for its energy requirements. He emphasized the impracticality of Europe only importing energy from the U.S. He stressed the need for Europe to keep a diversified energy portfolio and not lose sight of supply security.
So keep your eye on this important trade deal in the weeks to come. All eyes will be on how this new incoming administration—both parties—addresses these ongoing challenges. It is evident that the EU wants to increase the bloc’s energy trade with the U.S. Readying this new plan for real-world execution has already encountered major hurdles.