Not the kind of major announcement that Donald Trump was implying. He announced the conclusion of what is being celebrated as history’s largest trade deal with the European Union (EU). This deal is meant to change the terms of the debate on transatlantic trade. It features a controversial new 15% tariff on goods imported from the EU. While the deal promises substantial benefits for the US economy, it raises concerns among various stakeholders about potential impacts on specific industries.
One of the best things about this deal is the EU’s seriousness. Their goal is to buy $750 billion of US energy products. Specifically, Trump claimed that the agreement would increase total EU investment in the United States by 73 billion dollars. At the time, he had only projected a decrease of $600 billion. This wave is already poised to pump tens of billions of dollars into US treasuries through import duties. As a result, it will completely upend the fiscal landscape.
Trump specified that this trade deal did not include pharmaceuticals. This exclusion has led to questions regarding the implications for the healthcare sector, as it remains a critical area of trade and investment.
American auto makers were congratulating themselves on a huge victory! The other positive move from the EU was their announcement of reduced tariffs on US produced passenger vehicles from 10% to 2.5%. This provision strengthens US car manufacturing. It further reinforces Trump’s perpetual push to boost domestic manufacturing.
The basic framework of this agreement still needs to be approved by all 27 EU member states. European Commission President Ursula von der Leyen expressed optimism about the deal, stating, “We will replace Russian gas and oil with significant purchases of US LNG [liquified natural gas], oil and nuclear fuels.” Her comments underscore the enormous potential game-changing move this new trade relationship could have in changing where we get our energy from.
Even with these exciting potential projections, not everyone is happy about the deal. The German carmaking trade body, VDA, voiced concerns that even a 15% tariff could cost the German automotive industry billions annually. Tariffs hurt American businesses with increased costs. Consequently, most businesses simply absorb these costs, shifting them onto consumers, leading to outrage over the potential harm to the broader economy.
As Hungarian Prime Minister Viktor Orban joined the discussions, he dropped a big one. He said that Trump “swallowed von der Leyen for breakfast,” underlining how fierce the negotiating power play was going on. As these types of comments suggest, trade policy is one major flashpoint in the broader geopolitical struggle between the US and China.
Stock markets in Asia and Europe reacted bullishly to word of the partial trade agreement. This increase is indicative that investors are starting to feel more confident. They understand the economic potential that better trade and investment relations between the US and EU hold.
Though the agreement brings many new opportunities to both personnel and stakeholders, it creates challenges that advocates and practitioners on the ground will need to manage. Francois Bayrou, a French politician, described the situation as a troubling trend: “It is a dark day when an alliance of free peoples, brought together to affirm their common values and to defend their common interests, resigns itself to submission.” His remarks highlight fears that multilateral cooperation may wane in an era of a more polarized world.