The US and EU have struck what's being called the largest trade deal in history, creating clear winners and losers across multiple sectors and economies following talks in Scotland last month.
President Donald Trump and EU chief Ursula von der Leyen announced the framework, which includes a 15% tariff on EU goods imported to the US and $750 billion in US energy purchases by Europe.
Trump Emerges as Major Winner
After promising new trade deals with dozens of countries, Trump has secured the biggest of them all. Most commentators suggest the EU gave up more, with Capital Economics predicting a 0.5% knock to EU GDP.
Tens of billions of dollars will pour into US coffers through import taxes. However, headlines celebrating the deal may not last long if critics point to recent inflation and jobs data as evidence that Trump's economic reshaping is backfiring.
US Consumers Face Higher Costs
Ordinary Americans already struggling with increased living costs could face additional burdens as the 15% tariff rate will likely drive up prices on EU goods.
Tariffs are taxes charged on imported goods, typically calculated as a percentage of the product's value. A 15% tariff means a $100 EU product will cost importers $115, with companies often passing these extra costs to customers.
While not as steep as originally threatened, the tariff represents a significant obstacle compared to pre-Trump trade relationships.
Markets Rally on Certainty
Stock markets in Asia and Europe rose after news of the deal framework emerged. Despite the significant 15% rate, it's less than what could've been imposed and offers certainty for investors.
"The agreement is clearly market-friendly, and should put further upside potential into the euro," Chris Weston at Australian broker Pepperstone told AFP.
European Unity Under Strain
The deal must be approved by all 27 EU members, each with different interests and varying reliance on US exports. While some members cautiously welcomed the agreement, others have been critical, revealing divisions within the bloc.
French Prime Minister Francois Bayrou called it "a dark day when an alliance of free peoples resigns itself to submission." Hungarian leader Viktor Orban said Trump "ate von der Leyen for breakfast."
German Carmakers Take a Hit
The tariff on EU cars imported to the US has been nearly halved from 27.5% to 15%. Cars are among the EU's top exports to America, with Germany as the largest EU manufacturer through VW, Mercedes, and BMW.
German leader Friedrich Merz welcomed the pact while admitting he'd hoped for "further easing of transatlantic trade." The German carmaking trade body VDA warned even 15% would "cost the German automotive industry billions annually."
American Carmakers See Mixed Results
US carmakers received a boost as the EU dropped its tariff on American cars from 10% to 2.5%, potentially increasing European sales of US vehicles.
However, the complex nature of American car assembly creates complications. Many US cars are assembled in Canada and Mexico, facing a 25% tariff when brought into America, higher than the 15% rate on EU vehicles.
Pharmaceutical Sector Faces Challenges
Trump previously threatened a 250% tariff on European-made drugs. While the final deal limits pharmaceutical tariffs to 15%, European pharma companies had hoped for total exemption.
The industry currently enjoys high US market exposure through products like Ozempic, a diabetes drug made in Denmark. Ireland has highlighted the importance of this sector and criticized the uncertainty's damaging effects.
US Energy Sector Wins Big
Trump announced the EU will purchase $750 billion in US energy while increasing overall US investment by $600 billion.
"We will replace Russian gas and oil with significant purchases of US LNG, oil, and nuclear fuels," von der Leyen said. This deepens European-US energy ties as Europe pivots away from Russian imports following Ukraine's invasion.
Aviation Industry Benefits
Von der Leyen confirmed "strategic products" including aircraft, plane parts, certain chemicals, and some agricultural products won't face tariffs. This ensures friction-free trade for aerospace component manufacturers between the trading blocs.
The EU still hopes to secure more "zero-for-zero" agreements, particularly for wines and spirits, in the coming days.
Long-term Implications
The deal represents Trump's biggest trade victory while highlighting EU vulnerabilities in transatlantic relationships. European solidarity faces testing as member states navigate different impacts from the agreement.
Consumer costs in America may rise despite Trump's promises of economic benefits, while European manufacturers must adjust to new competitive realities in the crucial US market.
The aviation and energy sectors emerge as clear winners, while the automotive and pharmaceutical industries face significant adjustments. Markets have responded positively to reduced uncertainty, though the real economic impacts will unfold over months and years.
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