The US-EU tariff agreement isn't real

And further negotiations are not going well

Remember the European Union’s claim, on 27 July, to have “agreed a deal on tariffs and trade” with the US? Well, it wasn’t really a deal. At best, the agreement was a list of intents. The intents are vague and challenging. Negotiations continue. They’re not going well. On 19 August, the EU quietly confirmed that it had rejected the latest US draft agreement.

This draft is for one of many agreements that would be necessary to fulfill the intents of what was promised back on 27 July. Although the EU and its apologists (that’s most of the articulate classes) won’t admit as much, the EU was on the back foot from the beginning.

On 27 July, a Sunday — a rushed Sunday, on Trump’s turf (a golf club in Scotland) — the EU agreed a US tariff rate of 15%, on a range of goods. Just think about that for a minute. Imagine yourself in 2024, considering the possibility that the EU – the self-described agent of European economic growth – would accept a whopping tariff on its exports to America – the EU’s largest national market. In 2024, the average tariff on EU exports was around 2.4 percent!

The 15-percent-tariff applies to many goods that the EU considers competitive with American goods, including automobiles, auto parts, pharmaceuticals, and semi-conductors. These sectors had been scheduled with American tariffs from 25 percent (automobiles and parts) to 30 percent (pharmaceuticals).

Did the EU accept 15 percent in those sectors as a bitter pill, so that it would be better off overall? No. The average tariff on U.S. imports from the EU will surge to 17.5% in 2026.

Some of the EU’s strongest sectors face even steeper tariffs. For steel, aluminum, and copper, US tariffs remain at 50 percent.

US tariffs will reduce the EU's annual gross domestic product by 0.2 percent, and industrial output by 0.3 percent.

And the impact will be worse for some members. The European Commission (which, after all, is not popularly accountable to member states or citizens) often makes deals that it can spin as a resolution to a crisis, without admitting the downsides for member states.

One of them is the EU’s traditional core economy: Germany. The long-term negative impact of the tariffs could be around 0.4% of GDP in Germany. That’s because Germany is an unusually strong exporter to destinations outside the EU.

Ironically, member states (such as Greece) that are highly critical of the core members (Germany and France, primarily), are less affected – because they export mostly within the EU.

The more affected countries, industries, and companies cannot necessarily compensate by exporting more within Europe, which is suffering long-term economic malaise (for reasons familiar to Britons: over-regulation, over-spending, under-controlled migration, over-generous welfare and benefits, inefficient government, cultural collapse).

But there’s more than tariffs to make the EU look bad. The EU will ‘pay’ for the privilege of lower-than-they-could-be tariffs.

The US and EU have conflicting accounts of what the EU committed to ‘pay.’

According to the White House, the EU will purchase $750 billion of US energy, and make new investments of $600 billion in American business, through 2028 (the end of Trump’s current term). This investment is additional to more than $100 billion that EU companies already invest in American business each year.

However, the EU countered that these amounts are, at most, wishes. The Commission says that it ‘indicated’ a desire to replace Russian energy with American energy, but it doesn’t control foreign investment by member states or businesses.

The Trump administration had already claimed victory: The White House says the agreement is ‘fundamentally rebalancing the economic relationship between the world’s two largest economies. The deal marks a generational modernization of the transatlantic alliance and will provide Americans with unprecedented levels of market access to the European Union.’

Meanwhile, the EU President (Ursula von der Leyden) claimed victory, by lowering tariffs from 30 to 15 percent tariff for some sectors. And the EU spin-doctors claim that the ‘agreement restores stability and predictability.’

That’s true for some sectors – but only for the next three-and-a-years, at most. Other sectors are still facing instability and unpredictability in the immediate term: the metal sectors, most obviously.

Some EU-rophiles admitted imperfection even while trying to tow the party line.