US President Donald Trump reached a trade agreement with European Union chief Ursula von der Leyen. They both hailed it as a good deal. Photo / Brendan Smialowski, AFP
The tariff-and-spending accord announced yesterday by the United States and the European Union stands to avert a damaging trade war between two of the world’s largest economies.
But it is lopsided in favour of President Donald Trump’s protectionist policies with Brussels swallowing bitter concessions in hopes of stabilising a relationship that is vital not just economically but also for security interests.
The rough agreement - which allows Washington to raise tariffs on EU goods while the Europeans promise to buy more US products - quickly came under sharp criticism in Europe.
Despite feisty rhetoric and vows to stand up to Trump, EU leaders largely acquiesced to the US leader’s ever-changing demands.
EU negotiators insisted the deal was the best possible way to avoid a highly damaging tit-for-tat trade war that would benefit rivals like China and Russia.
European officials and analysts said the tentative agreement does not even end the uncertainty because so many details must still be worked out.
To the harshest critics, including some in France who spoke of a “capitulation” and “humiliation”, the agreement is proof of a deeply unbalanced alliance, and the latest example of European appeasement of Trump.
At Nato, allies similarly strained to pledge a huge increase in military spending demanded by Trump.
European Commission President Ursula von der Leyen, who announced the deal with Trump while sitting next to him at one of his golf resorts in Scotland, touted “a huge deal” clearly playing to Trump’s love of largeness.
But at her news conference soon afterwards, von der Leyen appeared far more sober, calling the 15% tariffs she had accepted on European automobiles to be “the best we could get”.
The EU, and in particular Germany, its auto-making powerhouse had hoped to eliminate the 25% US car tariffs entirely.
“We should not forget where we came from,” von der Leyen said. “Fifteen per cent is certainly a challenge for some, but we should not forget it keeps us the access to the American markets.”
Trump indeed had threatened far worse, including a 30% across the board tariff that upended months of painstaking negotiations.
Under the new deal, the US will now impose a 15% duty on most imports from the EU. The blanket rate foisted on the EU mirrors a US deal announced this month with Japan, another Group of Seven ally, but it is higher than the 10% that Britain secured earlier this year and that EU officials had grudgingly accepted in recent talks.
Since World War II, trade agreements have largely sought to reduce the cost of buying and selling goods across borders.
A 2017 deal the EU struck with Canada eliminated tariffs on most goods traded between them. An agreement signed with Vietnam in 2019 aims to phase out nearly all customs duties.
Trump’s accord with the EU goes in the opposite direction, raising tariffs, with some exceptions.
Economists say the tariffs will increase costs for importers, who must pay the duties, and put upward pressure on inflation. Consumers and businesses will likely bear some of the extra costs, experts say.
In France, where President Emmanuel Macron had urged the EU to take a harder line, the deal drew sharp backlash.
While Macron was quiet on today, Prime Minister Francois Bayrou said it was “a dark day when an alliance of free people, brought together to assert their values and defend their interests, resigns itself to submission”.
Von der Leyen’s European Commission, the EU’s executive body which negotiates trade policy for its 27 member nations, had faced calls from Germany and Italy, two countries that do outsize business with the US, for an accord that would limit damage to their export-dependent companies.
But even capitals that had urged a conciliatory approach were not exactly celebrating today.
“The agreement successfully averted a trade conflict that would have hit the export-oriented German economy hard,” German Chancellor Friedrich Merz said.
Still, members of the European Parliament from Germany blasted the deal even as it reduced Trump’s tariff on cars, one of Germany’s central demands.
“My first assessment: not satisfactory; this is a lopsided deal,” said Bernd Lange, who chairs the European Parliament’s committee on international trade.
“Concessions have clearly been made that are difficult to accept. Deal with significant imbalance. Furthermore, lot of questions still open.”
Dutch Prime Minister Dick Schoof acknowledged that “no tariffs would have been better” but called the deal “vital for an open economy like ours”.
Belgian Prime Minister Bart De Wever said: “One thing is clear: This is a moment of relief but not of celebration”.
The talks laid bare the EU’s queasiness at using its economic muscle, one of its few areas of leverage against Washington, at a time when allies have had to calibrate repeatedly to keep Trump on board as Russia wages war in Ukraine.
Ultimately, after months of mixed signals and threats from Trump, EU leaders said they accepted a deal to give their industries a reprieve from the months of uncertainty that threatened to cripple business.
Officials suggested they had relented out of concern that Trump was prepared to raise tariffs to a level that would effectively halt trade between Europe and the US.
“Let’s pause for a moment and consider the alternative: A trade war may seem appealing to some but it comes with serious consequences,” said the EU trade commissioner, Maros Sefcovic, who shuttled to Washington in recent months for difficult talks with Trump officials.
“Our businesses have sent us a unanimous message: avoid escalation and work towards a solution that brings immediate tariff relief,” Sefcovic told reporters today.
He said he and his team had travelled to Washington 10 times for a deal and said that the EU’s calculations reached beyond trade.
“It’s about security, it’s about Ukraine, it’s about current geopolitical volatility,” Sefcovic said.
He said he couldn’t go into detail on what was discussed in the room with Trump yesterday, “but I can assure it was not just about the trade”.
Now, nearly 70% of European goods will face the blanket tariff, a big increase in charges, according to a senior EU official who spoke on the condition of anonymity to speak frankly about the details of the deal, which is still under negotiation.
The EU had sought carve-outs from the US tariff regime for key sectors including wine and spirits and aircraft parts. The announced agreement eliminates tariffs on airplane parts but a decision on wine and spirits was postponed.
EU officials said talks will continue in the coming weeks.
The two sides appeared to diverge on other details. The White House indicated that a 50% tariff on steel would remain in place, while EU officials said there would be further negotiations on lowering steel tariffs.
Many officials and experts said that it was crucial to sort out the details.
“We need to understand what is included,” said Brando Benifei, an Italian member of the European Parliament and head of its delegation for relations with the US.
Benifei and others questioned whether US probes into the national security aspect of trade relations might result in extra tariffs down the line, such as on EU pharmaceutical products.
At first glance, Benifei said the deal “seems very asymmetric”.
“The result is due in my view to the push by some governments to have a deal at any cost, which has weakened our stance,” he added. “Because the US knew some governments wanted a deal whatever the cost.”
Others noted that Trump’s threats managed to shift the view on what constituted relief.
Just a few weeks ago, EU and US negotiators neared an agreement that involved a blanket tariff of 10%, before a Truth Social post by Trump derailed them.
Today, some investors saw benefits for Europe’s key auto industry, for instance, which would see US car tariffs reduced to 15% from 25%. The tariffs, however, were at 2.5% before Trump’s global trade blitz, and some industry groups noted their dismay.
“The US tariff rate of 15%, which also applies to automotive products, will cost German automotive companies billions annually and burdens them,” Hildegard Mueller, president of Germany’s main auto industry group, the VDA, told Agence France-Presse.
On some issues, the Europeans stood their ground. Trump officials had pressed the EU for concessions on tech industry regulations and on food standards, which the bloc insisted were non-negotiable.
As part of the deal, Trump said Europe had committed to buying more US energy and weapons and boosting investment in the US.
But those provisions are mostly aspirational promises without guarantees.
European nations were already poised to buy more US weapons under an arrangement with Trump to continue arming Ukraine, and the bloc was already seeking alternative energy sources, including liquefied natural gas from the US, as part of its push to phase out Russian energy imports.
More energy purchases and European investments would come from member states and companies which Brussels does not control.
Italian Prime Minister Giorgia Meloni, seen as a close Trump ally in the EU, heralded the deal, while saying details still need to be worked out.
“I obviously welcome the fact that an agreement has been reached,” Meloni told reporters.
Still, she added, “we need to verify the possible exemptions, particularly for certain agricultural products. So there are a number of elements that are missing.”