How Resilient Is the EU Economy Under the New US Trade Deal?

The European Commission has described the recently concluded tariff agreement with the United States as the best outcome achievable, but questions remain about its economic impact. Under the deal, most EU exports to the US will now face a 15% customs duty.

In 2024, the US imported goods worth $606 billion from the EU while exporting around $370 billion (€318.7 billion) in return. To narrow this trade gap, Washington will now impose a 15% tariff on about 70% of EU exports under the agreement reached on 27 July. This rate is higher than that applied to the United Kingdom, which secured a 10% tariff arrangement, though the Commission argues that the EU’s deal is more comprehensive.

Tariff exemptions were secured for strategic sectors, including aircraft and components, pharmaceuticals, natural resources, and critical raw materials. The EU auto industry also sees some benefit, with its tariff reduced to 15% from the 27.5% rate introduced earlier in Trump’s presidency. However, steel and aluminium remain subject to a 50% duty.

Despite these concessions, several EU governments view the outcome as a setback, with criticism that the bloc conceded too much. Brussels has signalled it may use countermeasures, including its anti-coercion instrument, which could restrict US companies’ access to EU public procurement.

The agreement also leaves broader economic challenges unresolved. While the EU maintains a trade surplus in goods, it runs a deficit in services, particularly in the digital sector. The reliance on American tech giants underscores the EU’s struggle to build a competitive digital single market capable of scaling its own firms globally.

Further pressure comes from US demands beyond tariffs. Brussels has pledged that European firms will invest at least $600 billion in the US by 2029 and purchase $750 billion of American energy products, including LNG, oil, and nuclear power. Washington also expects arms purchases, though such decisions ultimately rest with EU governments and private companies, not the Commission.

The deal still requires ratification by all 27 EU member states, and approval may not come easily given the political and economic concerns it has already sparked.

Source: Euro News