Watch Out, Europe: Trump Can Upend the Trade Deal Again Any Time
The European Commission prides itself on having provided strategic clarity for EU companies. The current agreement is far from complete.
Only a few weeks after Donald Trump took office, New York Times columnist Ezra Klein put it bluntly: “Don't believe him.” No matter what the U.S. president does, says, promises or announces: Don’t take anything at face value.
The same applies to the trade deal with the EU. In recent months Trump has flip-flopped and back-tracked constantly; it's hard to feel certain of anything. Who's to say the U.S. president won't pull out another tariff threat if the Republicans face poor polling ahead of next year’s midterms?
All the more surprising, then, that Ursula von der Leyen, president of the European Commission, proudly claims the agreement offers businesses, “Certainty in uncertain times.” If anything, this statement seems more like a form of self-reassurance for the European negotiators. Because with Trump, there’s no such thing as "planning certainty and stability" — especially not with a deal that raises more questions than it answers.
Many Questions Remain Unanswered
A reminder: In line with the agreement between Trump and von der Leyen, the EU must accept that most of its products will be subject to a 15% tariff going forward. Steel and aluminum will be subject to a tariff of 50%. In addition, the EU is expected to commit to purchasing $750 billion worth of energy from the U.S. and investing $600 billion over the next three years of Trump’s presidency. The Europeans receive nothing in return.
Aside from these cornerstones, most of it remains completely up in the air. It starts with the fact that the EU doesn’t even know on what legal basis the agreement is supposed to be implemented. On top of that, roughly one-third of import products still lack a fixed tariff rate — including Austrian wine imports. According to von der Leyen, steel and aluminum remain under negotiation, with hopes of introducing quotas at significantly reduced import tariffs.
The Cost of Uncertainty
The principal unresolved issue concerns the EU's energy purchases from the U.S. There is uncertainty not only about whether this involves additional quantities, but also about whether the U.S. is in a position to supply them. It remains especially unclear how the European Commission plans to persuade European companies to actually make purchases in the U.S. This same holds true for the $600 billion in investments to which von der Leyen committed. What if one day Trump wakes up and decides that the EU hasn't paid enough?
As pessimistic as it sounds, European companies must continue to face massive uncertainty. This will lead to additional costs, hinder investments and destroy jobs. According to a report by the Kiel Institute for the World Economy, Europe should not respond to Trump’s unpredictability with a wait-and-see approach, but instead assert itself as a “strategic superpower.” One possible course of action would be to establish a global alliance of leading industrialized nations to collectively impose counter-tariffs on U.S. exports. The present agreement shows little evidence so far of any such “strategic major power.”
Only a few weeks after Donald Trump took office, New York Times columnist Ezra Klein put it bluntly: “Don't believe him.” No matter what the U.S. president does, says, promises or announces: Don’t take anything at face value.
The same applies to the trade deal with the EU. In recent months Trump has flip-flopped and back-tracked constantly; it's hard to feel certain of anything. Who's to say the U.S. president won't pull out another tariff threat if the Republicans face poor polling ahead of next year’s midterms?
All the more surprising, then, that Ursula von der Leyen, president of the European Commission, proudly claims the agreement offers businesses, “Certainty in uncertain times.” If anything, this statement seems more like a form of self-reassurance for the European negotiators. Because with Trump, there’s no such thing as "planning certainty and stability" — especially not with a deal that raises more questions than it answers.
Many Questions Remain Unanswered
A reminder: In line with the agreement between Trump and von der Leyen, the EU must accept that most of its products will be subject to a 15% tariff going forward. Steel and aluminum will be subject to a tariff of 50%. In addition, the EU is expected to commit to purchasing $750 billion worth of energy from the U.S. and investing $600 billion over the next three years of Trump’s presidency. The Europeans receive nothing in return.
Aside from these cornerstones, most of it remains completely up in the air. It starts with the fact that the EU doesn’t even know on what legal basis the agreement is supposed to be implemented. On top of that, roughly one-third of import products still lack a fixed tariff rate — including Austrian wine imports. According to von der Leyen, steel and aluminum remain under negotiation, with hopes of introducing quotas at significantly reduced import tariffs.
The Cost of Uncertainty
The principal unresolved issue concerns the EU's energy purchases from the U.S. There is uncertainty not only about whether this involves additional quantities, but also about whether the U.S. is in a position to supply them. It remains especially unclear how the European Commission plans to persuade European companies to actually make purchases in the U.S. This same holds true for the $600 billion in investments to which von der Leyen committed. What if one day Trump wakes up and decides that the EU hasn't paid enough?
As pessimistic as it sounds, European companies must continue to face massive uncertainty. This will lead to additional costs, hinder investments and destroy jobs. According to a report by the Kiel Institute for the World Economy, Europe should not respond to Trump’s unpredictability with a wait-and-see approach, but instead assert itself as a “strategic superpower.” One possible course of action would be to establish a global alliance of leading industrialized nations to collectively impose counter-tariffs on U.S. exports. The present agreement shows little evidence so far of any such “strategic major power.”
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