On Sunday, US President Donald Trump and European Commission President Ursula von der Leyen announced the details of a new trade agreement. This announcement was met with swift condemnation from European leaders. As it stands, the deal is drastically tilted in favor of the United States, and public uproar across Europe has been intense. This has led to troubling questions about what this means for the local industries and economies.
European leaders have railed against the deal as “imbalanced.” They emphasize the enormous disparity between the benefits they are awarding to US exporters and the hurdles they are imposing on European goods. You negotiated significant concessions from Europe, including a $750 billion Liquefied Natural Gas (LNG) export agreement and $600 billion in targeted investments for strategic American industries. This agreement has been the focus of enraged opposition from across the EU.
Second, even within this new trade framework, most European goods will continue to be met with high tariffs. In 2024 European products will be subject to an average tariff rate of 1.2%. This rate will rise exponentially to a uniform 15% on most exports to the United States. Additionally, US exports to the EU will continue to be tariff-free. Yet the arrangement is perceived by European leaders as deeply unfair.
The agreement maintains punitive 50% tariffs on EU steel and aluminum exports to the United States, which remain untouched despite calls for revision. Across the pond, UK Prime Minister Keir Starmer has been equally loud in calling for deeper cuts—notably on steel tariffs. Furthermore, President Trump recently proposed relaxing tariffs on UK pharmaceutical exports, potentially relieving some of this pressure from these industries.
The agreement has particularly large impacts on automobile, machinery, and consumer sectors. The deal includes a “zero-for-zero” provision. This clause exempts a range of strategic goods, such as aircraft parts, some chemicals, semiconductor equipment and select agricultural products. This exemption represents about a third of all EU exports.
In particular, the immediate economic response to the trade agreement has been pronounced. The Euro (EUR) has been increasingly weak against the British Pound (GBP). On Monday, the EUR/GBP cross sharply reversed after recently reaching its peak in almost two years at 0.8753. Analysts have poured over this decline, with most ascribing it to increasing popular opposition to the US-EU trade agreement and its attendant inequalities.
European leaders are now making a loud, aggressive case about the long-term dangers of the agreement. They are concerned that it would have a negative impact on their states’ economies and manufacturing sectors. They are understandably concerned that an uneven trade playing field might deepen the economic vulnerabilities that already plague much of Europe.
“This is a great deal for both sides.” – Donald Trump
It is no wonder that European leaders are frantically trying to figure out what this deeply unpopular trade deal means. They are wrestling with how to react to what they believe is a bad deal. Now, leaders in Europe are starting to sense that same change in mood. So they should reconsider how they plan to approach upcoming negotiations with the United States if they want to achieve better results for their own economies.