Europe folds as Trump claims trade victory
European Commission President Ursula von der Leyen yesterday achieved peace in a US–EU trade war that never was. Following last week’s shakedown of Japan for a similar deal and a last-minute meeting at US President Donald Trump’s golf club in Scotland, the trade agreement signed by the Commission has restored some certainty to markets that did not know how—or whether—to price in the impact of potential across-the-board 30% US tariffs on EU goods.
However, certainty has come at a cost that is difficult to characterise as anything but a capitulation. Not long ago, this outcome would have been incomprehensible. Just last month, a double-digit baseline reciprocal tariff was still deemed an unacceptable part of any trade deal.
From this perspective, across-the-board 15% non-reciprocal tariffs on most EU goods sure looks like a total rout. While there are areas—pharmaceuticals, aircraft, semiconductor equipment, and potentially others—where zero-for-zero tariffs have been non-bindingly agreed, Europe’s willingness to accept 15% runs the risk of enticing Trump to return for a second bite (even though economists warn that tariff revenue starts declining at higher rates). Some uncertainty persists as well, with Trump claiming the pair will “address unjustified digital trade barriers”, something the EU rejects.
But non-reciprocal tariffs, which have not been matched by any US concessions to mitigate them, are not the only cost. The deal also includes a commitment to purchase $750 billion worth of US energy products over the next three years, invest $600 billion in the US economy, and scale up procurement of US military equipment. Even though the EU will have to plug the hole of Russian LNG as it phases it out, and US military materiel will be a part of its defence build-up, the sums are far too large to be realistic. Greater reliance on US defence firms will do little to strengthen the EU’s position against future coercion. And, as was quickly pointed out, investment and energy purchases rely on private businesses, which the Commission can’t control.
The deal is also a missed opportunity on three strategic fronts. Firstly, it calls into question the EU’s capacity to project geoeconomic deterrence, having failed to leverage access to the Single Market, and leaving unused the defensive arsenal that the Commission’s trade services had been assembling since the first Trump presidency—principally the anti-coercion instrument. Secondly, folding to Trump’s coercive bargaining also vindicates his worldview, undermining the WTO’s already fragile standing and ushering in a harsher, more unpredictable commercial, diplomatic, and political environment. Lastly, it shows the Union putting interest before values, undermining its position in future trade negotiations.
At the end of the day, the EU27 did not want to engage in a trade war with Trump, which tied the hands of the Commission in how it could respond to the US trade aggression. The stakes were undeniably high, and the best course of action unclear—continued US involvement in Europe’s security architecture and support for Ukraine surely played a significant part in the calculations of European capitals. Regardless of the circumstances, the outcome is clear. In the moment of truth, the EU blinked.
Varg Lukas Folkman is a Policy Analyst in Europe’s Political Economy programme at the European Policy Centre.
Raul Villegas is a Policy Analyst at the Executive Office of the European Policy Centre.
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