By Janet Ekstract, NEW YORK – On July 27, U.S. President Donald Trump announced what his administration lauds as a “historic” trade deal with the European Union though analysts and economists aren’t so sure about the final outcome. According to the Trump administration, the new trade deal is set to rebalance the economic relationship between both nations known as a Cooperation Agreement on Reciprocal, Fair and Balanced Trade. Trump met with EU Commission President Ursula von der Leyen and UK Prime Minister Keith Starmer during his five-day visit in the UK with the goal to achieve a deal both nations can live with. Von der Leyen in a press conference on July 28, underscored the need for stability when asked about whether the deal was a suitable one for the EU. She acknowledged that the deal for the EU side was not perfect, but that going forward, consistency and knowing where the EU stands on tariffs with the U.S. was a crucial factor in coming to the current agreement.
Meanwhile, leaders from Germany and France are not happy about the deal for the EU with German Chancellor Fredrich Merz commenting that it will “substantially damage” Germany’s finances. French Prime Minister Francois Bayrou calls the deal a “submission” to the U.S. The fact that the EU agreed to a 50% tariff on steel and aluminum imports from the U.S. did not. Reaction throughout the bloc is not enthusiastic though several countries said it was better to sign a deal to avoid a major trade war. The deal includes a 15% tariff on a majority of EU exports to the U.S. – half of what Trump had threatened with a guarantee from Europe that they buy more American energy and cutting taxes on some imports. The trade talks were held at Trump’s Turnberry golf course in Scotland with von der Leyen describing the agreement as a “huge deal” while Trump praised it as a way to bring the U.S. and EU “closer together.” The deal still requires the approval of all 27 members of the EU and each of those members had their own interests and levels of reliance on the export of goods to the U.S. Germany’s chancellor cautioned that both economies of the U.S. and Europe will be incur a negative impact but did acknowledge that the negotiating team in Brussels “couldn’t expect to achieve anymore.”
On July 28 in a press conference, EU Trade Commissioner Maros Sefcovic said that it was the “best deal we could get under very difficult circumstances.” Sefcovic also highlighted the need to make sure that the U.S. and Europe are “aligned on the geopolitical issues of today,” pointing out security implications in having friendly trade relations with the U.S. with regard to the Ukraine war. Meanwhile, details of the deal still need to be finalized in technical talks though the broad outline of the deal is in place. The National Foreign Trade Council in Washington D.C. said that any deal that avoids a trade war is “welcome progress.” However, the Council warned that any “short term gains” from a 15% tariff could at some point, leave the U.S. “isolated from a major ally and erode trust long term.” The Council added that previously, in a tariff-free regime – industries were allowed to develop “on both sides” including aerospace and pharma. The initial deal framework “leaves in place a number of troubling EU policies,” the Council said – including what it labeled as a “discriminatory digital agenda” and “unfair pharmaceutical reimbursement policies.” Think tank analysts and economists in the U.S. said Trump’s tariffs could eventually “lead to stagnation of wages, if not layoffs and closures of plants,” if costs are unmanageable. The U.S. president insists his tariff taxes will reduce the budget deficit the U.S. finds itself saddled with while inducing a need for domestic factory jobs. Though President Trump plays down the risks of higher prices to Americans – a number of small business owners and those with family businesses that provide livelihoods for many, have said that just the opposite will happen. There is also the danger that automakers and construction businesses could end up passing the extra costs on to consumers and this has been an ongoing fear and uncertainty for months ever since Trump announced his intention to raise tariffs.
