The trade agreement reached by the United States and Europe in a picturesque golf course in Scotland recently seems to be a quit, but in fact it is an “asymmetric” transaction full of hidden dangers: the EU has exchanged for the current relatively “loose” tariff environment with its huge future energy procurement and investment commitments.
The dark side of the agreement is first revealed in the 15% tariffs on most EU exports (including core industries such as automobiles, semiconductors and medicines). This undoubtedly brought heavy economic burden to EU companies. Dirk Jandula, chairman of the German Wholesale and Foreign Trade Association, even bluntly described it as a “painful compromise” and may even threaten the survival of some companies. Although European Commission President von der Leyen called it “the best acceptable result under current conditions”, he could not conceal the helplessness and unsatisfactoryness of the 15% tariff. The brief rise in the euro against the U.S. dollar also failed to completely cover up the market’s cautious attitude towards future prospects. Capita Macro even predicts that the agreement may lead to a decline in the overall GDP growth rate of the EU by about 0.3%. European Parliament International Trade Commission President Bainder Lange bluntly criticized the agreement for its lack of balance, especially the $600 billion investment commitment, which may come at the expense of the EU’s own interests.
The other side of the agreement is the EU’s commitment to purchase up to $750 billion in energy products, including liquefied natural gas and oil, in the U.S. over the next few years, and an additional $600 billion in investment commitments. For the United States, these “future economic injections” are undoubtedly a huge gain, directly responding to the Trump administration’s long-standing concerns about the US-European trade deficit (the deficit in 2024 is as high as US$235.6 billion).
However, this agreement is not the end of the US-EU trade dispute, but may instead herald the beginning of a new round of game. Looking back, the Trump administration has repeatedly wielded the stick of punitive tariffs of up to 30%, putting US-EU trade negotiations into a tense deadlock. In April this year, the EU planned to impose a 25% retaliatory tariff on US products worth about 21 billion euros, and the US also simultaneously imposed a new tariff of 20%. The tension between the two sides reached its peak. In the end, the EU avoided 30% of the “blockbusters” but had to bear the reality of 15%.
Why does the EU seem to be inconfident in negotiations? Its own difficulties cannot be ignored. In the field of commodity trade, reciprocity is often a “both loser” strategy. Imposing tariffs on American agricultural products or alcohol will ultimately harm the interests of European consumers and impact related industries in member states such as France and Italy. Some scholars believe that the EU’s more effective countermeasures should be focused on the Digital Service Tax or the Counter-Correct Tools Act (ACI), but these “weapons” are still in the theoretical stage and are difficult to truly play a role due to the differences in interests among member states and the complexity of practical operations. Ireland and other countries are particularly cautious about enabling ACI because the headquarters of US technology companies are concentrated in their territory. In addition, the paralysis of the WTO dispute settlement mechanism has also deprived the EU of important ways to seek international rulings. The relative fragility of the European economy itself further limits the EU’s pivotal space when bargaining with the United States.
What is even more worrying is that there are major differences between the two parties on the interpretation of key details of the agreement. For example, on the issue of tariffs on steel and aluminum products, President Trump publicly stated that he would maintain a high 50% tariff, while Chairman von der Leyen claimed that the tax rate would drop and introduced a quota system. This contradictory expression indicates that the two sides have not reached a true agreement on the core issues. How the EU can fulfill its huge commitments in energy procurement and investment in the future is also a huge challenge. Any deviation in execution may become an excuse for the United States to restart the trade dispute. Professor Fukater is not optimistic about the prospect of a long-term agreement between the United States and Europe, pointing out that President Trump has had a record of abandoning the agreement in the past, adding more uncertainty to the future.
