Can the EU economy withstand the trade deal with the US?
"It was the best possible deal," the European Commission said of the tariff agreement reached between the US and the EU, with the vast majority of the bloc's exports now attracting 15% in customs duties. We analyse the impact of the "America First" imperative on the European economy.
READ MORE : http://www.euronews.com/2025/08/26/can-the-eu-economy-withstand-the-trade-deal-with-the-us
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00:00It was the best possible deal the European Commission said about the agreement on trade tariffs between the European Union and the United States.
00:23The vast majority of European products exported to the world's largest economy will have to pay 15% in customs duties.
00:32You Decoded explains the impact of the imperative America First on the European economy.
00:38In 2024, the US imported $606 billion worth of goods from the EU and exported around $370 billion worth.
00:48To reverse the deficit, the US will now apply a 15% tariff to approximately 70% of the goods it receives from the EU.
00:57The auto industry is one of very few sectors viewing this positively, since it will pay 15% instead of the 27.5% imposed at the beginning of Trump's term.
01:07By contrast, steel and aluminium will continue to be levied at 50%.
01:11The parties agreed that tariffs will not apply to some strategic sectors for both blocs.
01:16The new tariff represents a substantial increase compared to the average 4.8% on goods applied before Donald Trump came into power this year.
01:28Let's hear what Europeans think about this deal.
01:31It's not the greatest of news.
01:34Maybe people who invest in these companies, for the government in general.
01:39But for me personally, I'm not too concerned.
01:43I don't think we should attack back.
01:45We also have to be a reliable partner.
01:47And that's not in the idea of free trade that the European Union is all about.
01:52Of course, we should try to look outside the EU, outside the Euro-Atlantic front, let's say.
01:59Maybe Asia.
02:00It's very important to open up to new markets.
02:03So personally, I think that we should ratify Mercosur, the agreement with Mercosur, as soon as possible.
02:10But the US market cannot be replaced in the short or in the medium term.
02:14Euro-News reporter Amandine S. has been covering this topic.
02:18Why does the European Commission consider 15% a good deal when, for example, the UK obtained a 10% rate?
02:26Well, the European Commission claims 15% is a good deal because the UK's 10% tariff is not an all-inclusive rate,
02:34which means it doesn't incorporate the existing US import tariffs applied to the UK.
02:40And another point is that the UK created preferential duty-free quotas for US beef and US ethanol,
02:46while the EU didn't make such concessions.
02:49What will be the impact on European Union's companies?
02:52Is it likely that some of them will move their factories to the US?
02:56So Bernard Arnault, the CEO of LVMH, has already declared that Louis Vuitton will open a new manufacturing site in the US.
03:04AstraZeneca also pledged to open a new plant in Virginia.
03:08Now the economists we talked to were not convinced.
03:11European companies will move their factories to the US on a large scale.
03:15First, we don't know for how long these tariffs will be in place.
03:18Donald Trump is known for being quite unpredictable.
03:21And second, companies producing in the US now have to pay more to import some of the inputs they need for their production.
03:29So it's another impediment.
03:30During the negotiations, the US president also asked for commitments from the EU on energy and arms purchases and more investment.
03:40How big are those commitments?
03:42And can the European Commission fulfill those promises?
03:47So the European Commission promised that European companies will invest at least $600 billion in the US by 2029.
03:56Now it's not really clear how it will happen because the European Commission cannot tell European companies where to invest.
04:02Then the European Commission pledged to purchase $750 billion worth of US LNG, oil and nuclear energy products.
04:14Now again, it's not really clear because it's not Brussels that would buy this energy.
04:20And Donald Trump claims the EU will purchase American weapons, but Brussels is not competent for arms procurement.
04:27So again, big question mark.
04:29The EU and the US trade around 1.5 trillion euros per year.
04:34And the two economies combined represent a market of 800 million people and nearly 44% of global GDP.
04:41Despite being two economic giants, the EU has a more dependent political position due to US military protection within NATO.
04:49The reaction from several European leaders was quite lukewarm.
04:53For example, French Prime Minister François Bayrou stated that it's a dark day when an alliance of free peoples resigned itself to submission.
05:02His Dutch counterpart, Dix Rolf, said that no tariffs would have been better.
05:08Our guest is Nicolas Poitier, research fellow at Brugel, a think tank based in Brussels.
05:14After the deal, the European Commission continued negotiating with the United States in order to obtain more tariffs exemptions on certain products and quotas for others.
05:26Is this the right move or it might be necessary to use rebelling countermeasures?
05:33So far, the Europeans have shied away from this.
05:37They announced countermeasures with the intention also kind of to bring the United States to the negotiation table.
05:43I think if we would see countermeasures, they would really depend on basically to which extent this agreement will unravel.
05:50We could see something that's very limited and that's also really targeted on specific products where the pain is very big for the US, but relatively small for the EU.
05:58If we see something like a big unraveling of the agreement, that will not suffice.
06:03And then we might see measures that actually also are very detrimental for the European Union itself.
06:06So the French government advocates the use of the anti-coercive instrument, which would prevent American companies from assessing European public procurement.
06:17What would be the implications of that?
06:19Even though the European Union has a trade surplus when it comes to goods, it has a deficit when it comes to services.
06:25All the digital services that we use, Facebook, Google, they are American services.
06:28And there was this idea of targeting them specifically, and the anti-coercive instrument would allow that.
06:32And here really the question is, how can you build a digital single market that would allow European companies to scale to the same extent that Google and Apple did in the past,
06:41and then compete with these companies in the global stage, rather than us just kind of importing these quick-scaled services from the United States?
06:48The European Commission President Ursula von der Leyen said that a paralyzed world trade organization should be replaced with another institution.
06:57Would that make any difference in the current protectionist trend?
07:02I'm not so sure it would make much of a difference.
07:05The reality is that most trade is still based on WTO principles, including trade with the United States.
07:11The problem with the WTO is that it has not been able to reform itself.
07:15And there are many issues that are open.
07:17And some of these issues is why the U.S. is not happy with it.
07:19But there's probably a need to create new ways of making progress on these issues, for instance, in cooperating more with other countries than, for instance, in East Asia.
07:28The European Commission has a mandate to negotiate trade deals on behalf of the entire bloc.
07:34But this needs to be approved by the EU member states, which could be a difficult process.
07:40On the other hand, the President Ursula von der Leyen emphasized that the U.S. signed 76 trade agreements and intends to have new ones.
07:50This strategy is enough to offset this blow by the U.S. remains to be seen.
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