Analyst: EU-US trade deal 'replaces' EU autonomy with 'vulnerability and an over-reliance on the US’

The US and the European Union have sealed a trade deal averting the threat of a trade war. But it is getting a mixed response among European leaders. Some say it was the best possible result considering the circumstances, and others view it as a capitulation. Heading into their talks on Sunday, US President Donald Trump and European Union chief Ursula von der Leyen said that there was a 50-50 chance of reaching an agreement with an August 1st deadline set by Trump looming. Around an hour later, they emerged, announcing a breakthrough between the world's two biggest economies. Tariffs on most exports from the EU to the US set at 15%, and the EU agreeing to make huge investments in US products, including energy and military equipment. For the EU, it's a painful compromise that brings some economic certainty, for now, at least. But is it really the best result that Europe could get? It marks a significant change from the proposed tariffs of up to 30% on most EU goods. That was the rate that Donald Trump announced in April when the trade spat began in earnest on what Trump dubbed Liberation Day. But it is a lot higher than before Trump returned to the White House. Here is the European Union's top trade negotiator defending the outcome. It's quite obvious that the world which was there before the 2nd of April is gone. And we simply need to adjust. This is the result of a month of genuine and relentless efforts unmatched in the intensity and matched only by the unparalleled importance of our transatlantic trade. Its $1.7 trillion value underscores just how much was at stake. Let's pause for the moment and consider an alternative. A trade war may seem appealing to some, but it comes with serious consequences. With at least a 30% tariff, our transatlantic trade would effectively come to a halt. I would like to welcome Cecilia Malmström, who was the European Union's trade commissioner from 2014 to 2019, currently a non-resident senior fellow at the Peterson Institute for International Economics in Gothenburg, Sweden. Welcome. So a trade war between the European Union and the US appears to have been averted. But if you look beyond that immediate point, would you say it's a good deal for Europe? I don't think anybody can call it a good deal. It was maybe the only possible deal. It's the deal we have. The question is, of course, how will it be implemented? Can we trust that this is it, or there will be maybe new tariffs coming next week or in a month? That the uncertainty plays a huge role here as well. Yeah, it's very—well, we needed to have a deal because of the uncertainty, and 15% is certainly better than 30%. But 15% is still much more than the 3.5%, 4% we had four months ago. So it's not a good deal. But it is maybe the only possible one. Well, the European Union's current trade commissioner, Maroš Šefković, says that this deal is not just about trade. He says it's also about security. It's about Ukraine. Do you think we should be judging it on those terms? Well, unfortunately, the new trading climate in the world and the narrative in the Trump administration is that tariffs are about everything. It's about national security. It's about immigration. It's about fentanyl. It's about punishing a country for a behaviour that he doesn't like. So yes, there is also the element of Ukraine. I think the European Union is afraid, for good reasons, that the US will withdraw its support from Ukraine. So it played in, and that's why it wasn't as tough as it might have been. But basically, it should be a trade agreement. But it's really not. It's a bunch of concessions from the European Union and an agreement on 15% tariffs. But there are still 50% tariffs on steel and aluminium, for instance. I'm just curious whether you think, whether Ursula von der Leyen and her team had gone on with a tougher negotiating approach, whether they could have possibly extracted a better deal from the Trump administration, or whether this was truly the best they could do? It's impossible to know, of course. I personally think they should have been tougher from the beginning. There was a moment where there was a decision on a small retaliation on the beginning of April. That was because of the steel and aluminium tariffs. They were only kept for 24 hours. And then they were withdrawn and saying, let's negotiate. I think they should have kept them. They were only for 22 billion euros. There was a much longer list that could have been used at a later stage. But of course, withdrawing them and not doing anything else didn't really show strength. So that was a mistake, I think. Could it have been an even better deal? It's impossible to know. It's very hard to negotiate with the Trump administration. If you look around with the other countries who have made deals, they have also made a lot of concessions and gained very little. Indeed, they were in a difficult position there. Do you think, however, there might be knock-on effects of this? Perhaps a message sent to other European trading partners, like China? Is there a risk that they're looking at this and seeing an opportunity to extract trading concessions from Europe? Well, they tried to approach the European Union some months ago and seeing whether there was a possible rapprochement between the EU and China. We had the EU-China summit just a couple of days ago, which was not successful. They agreed on a couple of non-binding measures on climate, which is good. But there were no agreements on trade. We have concerns with the trading situation with China, with subsidies, with overcapacity, with dumping, and so on. So, no. But what I do think is that there are lots of countries, apart from the US and China, around the world who want to trade in predictable, rule-based, transparent terms. And that's why the EU has been busy trying to engage with so many other countries now, with India, with Indonesia, with the Mercosur countries. Hopefully that agreement will be ratified later this fall. Also approaching the Indo-Pacific trade agreement between 12 countries called the CPTPP. I think these are the kinds of cooperation that we should explore more to de-risk and to lessen our dependence from the European Union, from the United States. Of course. We've been talking at quite a high level about negotiation tactics, about possible future deals. I do want to look at this deal that has just been done and perhaps draw back a bit to help our audience understand what it actually means. When you settle on something like 15 percent, who ends up paying that? Is it falling on European exporters, or will it work its way to consumers in the United States? Well, a tariff is ultimately a tax, so it makes things more expensive. So, on the things that we export to the United States, they will become 15 percent more expensive. That can mean that we export less, and that will affect European companies. But ultimately, it will mean that the American consumers, they pay that fee. And as this is the case for so many other countries in the world, where they have put tariffs of 15, 19, 20, 22 percent, and so on, things that consumers buy will become much more expensive. And this is going to affect the ordinary American citizen and the ordinary American family, and it will be inflationary. So, it is not a good deal for the American system, either. And how will it be felt on the other side of the Atlantic? I'm curious what impact these tariffs are likely to have on European economies. Well, it's very hard to judge right now. It depends on how the pattern is. If we manage to find new partners to export to, it might not affect that much. But it's likely to be less exports to the U.S. We will need to find other markets. So, it's very hard to calculate. But, of course, 15 percent is a lot, because it was 3, 4 percent in April before this whole reciprocal tariff started. So, of course, it will be felt. But exactly how much is hard to judge. I know it's difficult to say, but are there certain sectors that are particularly vulnerable to this? Well, the sectors where we export a lot to the U.S., the car industry, obviously, we did not get any exceptions there. The pharmaceutical industry, probably the agriculture industry as well, maybe woods. And we know that steel, and many countries in the European Union produce and export steel, we have now 50 percent tariff there. So, of course, this would be a blow to those companies, and it could affect growth and jobs. Well, thank you so much for taking the time to speak with us, with your expertise here. We've been chatting with Cecilia Malmström, the former European Trade Commissioner. Thanks again. Thank you. The European Union's trade agreement with the Trump administration is getting mixed reviews. EU officials insist the framework deal helped avert a disastrous trade war. But French officials are calling the pact a submission. And Germany's chancellor is warning the 15 percent tariffs will do considerable damage to the country's economy. European carmakers can breathe a sigh of relief. A 15 percent tariff on everything they export to the U.S., that's less than the over 27 percent that was added in recent months. Yet, a 15 percent levy will cost manufacturers billions of euros each year, according to industry analysts. Some say the deal is painful. I think this is a glass half full, half empty. It is half full because there is this sense of relief and that the worst outcome is excluded, where the worst outcome could have been 30 percent tariffs or even a trade war. On the other side, this is not what the EU wanted. I mean, the EU asked for a zero tariff trade agreement, and this is not what we had. In 2024, the EU exported nearly 532 billion euros worth of goods to the United States, and imported goods worth 333 billion euros. This resulted in a trade surplus of almost 200 billion. Pharmaceutical products, vehicles and machinery accounted for the lion's share of EU exports to the U.S. The U.S. exported petroleum products, power generating machinery and gas to the European Union, among other things. For industries like the steel and aluminium sectors, the agreement does not provide relief. Tariffs on EU exports to the U.S. will remain at 50 percent, the rate previously imposed by Trump. The EU Commission now wants to try negotiating the quotas. France, among others, is critical. Yes, the fact that we now have a form of stability with our American partners is welcome. Is the agreement balanced? No. To be very clear, this agreement is not balanced, and we will therefore need to continue working, particularly on the services side. In the end, this agreement mainly concerns goods, tariffs and manufactured products. In addition, the EU has agreed to purchase 750 billion dollars worth of energy, and invest an additional 600 billion dollars in the United States. If investments flow overseas instead, it could cost many jobs in Europe. I'd like to bring in analyst Penny Nass with the German Marshall Fund for more here. So, we have a 15 percent tariff on most EU exports to the United States, while Europe has dropped its own tariffs on American goods. Some are calling this a bad deal for Europe, and I'm just curious what your take is. Hi, thanks so much for having me tonight. I do agree. I think that Trump has negotiated a very good deal based on his objectives and his goals. And I think that the EU has not met its objectives in this negotiation. I think that in general, President Trump started off his term with a huge focus on trade, and the EU was not prepared for the direction that he took. It made them off-balanced. And now they've had to negotiate what looks like the least worst deal they could negotiate. Do you think that's what is behind this, that the EU simply saw a case of any deal is better than no deal? I think that they looked at the alternative, which was a 30 percent tariff and a potential trade war, as something that would be damaging to Europe's long-term and short-term interest. And backed in the corner, this was the best option they had available and on the table. Yeah. Can you walk us just through some of the details of this deal? Who's set to come out on top here? Who might the big losers be? Yeah. So when I looked at the deal and where some of the winners and losers are, the details are still really being negotiated in real time. So 15 percent across-the-board tariffs that will also cover automobiles, pharmaceuticals and semiconductors. There are 11 sectors that the United States is currently adding additional tariffs onto. Auto, steel and iron, copper, pharmaceuticals and semiconductors are some of that group. And so a few of those are getting potentially a 15 percent tariff. It's still not clear how semiconductors and pharmaceuticals will come out. But steel, iron and copper are at 50 percent. We've also seen that the U.S. has announced unilaterally that Europe will drop all of their tariffs on industrial goods to zero. Europe has indicated that there are a few categories of goods that will have a zero for zero agreement. If Europe's version is correct, those products, which include aerospace, some chemicals, some generic medicines and some critical minerals, would I think be the winners coming out of this agreement. They would get zero for zero, which means you wouldn't pay tariffs in either the U.S. or in Europe on those products. But most other products will will have some tariffs, and that will create competitive pressures for European companies that are trying to sell in the United States. OK, so we will have to wait for some of those details to shake out. One thing that really strikes me is that over the past few years, the EU has been often talking about strategic autonomy. This deal does seem to tie the block more closely to U.S. energy and military in some ways. Do you see that as pulling things in the opposite direction? I 100 percent agree with you on that point. I do think that the deals that were announced, not only the 750 billion in energy imports that Europe will now has now committed to buy from the U.S., will swap Russia for the United States in terms of Europe's energy dependency. Similar, the 600 billion in investments, which include, according to reports, some defense and military items that Europe will buy from the U.S., but also A.I. chips, will put Europe on what I would call the U.S. operating system, both for military and for A.I. And so I think that that creates a real discrepancy between what Europe is saying they want in terms of strategic autonomy, but they're now replacing it with strategic vulnerabilities and an over-reliance on the U.S. Well, this has been absolutely fascinating. Thank you so much for sharing your insights with us today on DW. That is Penny Nass with the German Marshall Fund. Thank you so much.