The trade deal between the US and the European Union, squeezed in days before the re-introduction of Donald Trump's "liberation day" tariffs, is reflective of the new politics of global trade. Faced with the threat of 30% baseline tariffs from Washington, as well as additional levies on specific sectors, the EU has secured a partial reprieve of a flat 15% tariff on all goods.
Author
- Maha Rafi Atal
Adam Smith Senior Lecturer in Political Economy, School of Social and Political Sciences, University of Glasgow
Was this the best the bloc could have achieved? In the time available, it may well have been. The 15% rate is higher than the UK secured earlier this year, but it's significantly below the level applied to China and Mexico , and on par with Japan .
The EU has also managed a "zero-for-zero" tariffs deal on some hi-tech goods, notably semiconductors vital for products like phones and laptops. This is something the UK did not push for or secure in its own framework agreed with the US president.
What's more, EU leaders have argued that agreeing to the deal has security benefits in protecting dwindling US support for European defence. The urgency of Europe's security concerns in Ukraine made these talks different from trade negotiations in the first Trump administration, when Europe could afford to be more aggressive .
The biggest winners in this deal are Europe's carmakers. The US has collapsed various sector-specific duties on goods like aircraft, cars and automotive parts into the 15% ceiling . This effectively reduces tariffs on EU-made cars (from 27.5%).
American automakers, meanwhile, rely heavily on parts from Mexico and China - still subject to higher tariffs at the time of writing. This makes EU vehicles more competitive for US consumers than "American" cars that rely on overseas parts.
Most importantly however, like the UK deal before it, the new EU agreement is a statement of understanding between the White House and the European Commission, rather than a formal treaty. A treaty would be subject to parliamentary ratification on both sides.
But the semi-formal nature of this agreement allows both Trump and European leaders to portray the deal as a "win" by playing fast and loose with what's actually in it.
For example, the Trump administration will celebrate an EU commitment to buy US$250 billion (£189 billion) in US energy imports annually. Yet the concession holds no legal weight in the EU. The European Commission, which negotiated with Trump, does not buy any energy nor does it manage the power grid inside its 27 member states.
The commission can encourage, but cannot compel, those states to buy American. (Indeed, it might want to do so anyway, since it helps it to pivot away from Russian gas). But ultimately, member states and businesses decide where their energy supply comes from, and they are not direct parties to the deal. Only a formal treaty ratified by the European parliament would compel them.
No guarantees from Trump
The informal nature of this agreement also allows EU member states to protest against what they see as capitulation to Trump's demands without real consequence. After all, there is not yet a treaty text they would be required to vote on or implement.
The Trump administration similarly imposed its sweeping tariff threats in early spring without a vote from Congress, and has been making ad hoc changes to the rates in the same way.
On the one hand, this means European countries may not ultimately be required to implement some of the deal's less savoury elements such as the energy purchases or lowering the bloc's own tariffs on US goods.
On the other hand, this means the Trump administration - notorious for abrupt changes of turn - can also renege at any time. In reality, there is little the EU can do about this. The question of leverage looms large. Trump's longstanding antipathy towards the EU - seeing it less as an ally and more as a rival - meant that Brussels was never negotiating from a position of strength.
The fact that the EU avoided the worst-case scenario, protected key sectors and secured other sector-specific advantages suggests a deal shaped not by triumph, but by containment of Trump. Since the deal was announced, the picture emerging from many European leaders has been one of gloom. True, the EU didn't win - but it survived. And that, for now, is probably enough.
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Maha Rafi Atal does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
