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Trade agreements

EU Trade Deal with US Sparks Concerns Over Economic Impact

Strategic Insights

— 2 min read

European leaders have expressed reservations about the recently agreed-upon trade deal with the US, citing potential economic damage. German Chancellor Friedrich Merz stated that the agreement will cause "considerable damage" to the European economy, leading to increased inflation and affecting transatlantic trade. French Prime Minister Francois Bayrou echoed these concerns, labeling the deal a "dark day" and accusing the EU of "resigning itself into submission".

Key Takeaways:

  • The EU-US trade deal, announced on Sunday, imposes 15% tariffs on most imports from the EU, a threefold increase from the average tariffs imposed by the US before Trump's "liberation day" announcements in April.
  • German Chancellor Friedrich Merz warned that the deal will cause "considerable damage" to the European economy, leading to increased inflation and affecting transatlantic trade.
  • French Prime Minister Francois Bayrou called the deal a "dark day" and accused the EU of "resigning itself into submission".
  • The agreement, hailed by European Commission President Ursula von der Leyen as "the biggest trade deal ever", covers nearly 44% of global GDP and secured a lower tariff rate for the EU than the 30% threatened by US President Donald Trump.
  • The euro fell 1.1% against the dollar and 0.8% against the pound following the announcement, with German and French stocks also declining.
  • The deal faces criticism from industry bodies, including the bloc's steel producers' industry body, which stated that a 15% tariff on most exports would add a "huge burden" on its members.

Statistics:

  • The US is imposing 15% tariffs on most imports from the EU, a threefold increase from the average tariffs imposed by the US before Trump's "liberation day" announcements in April.
  • The agreement covers nearly 44% of global GDP.
  • The euro is 12% higher against the dollar for the year, boosted by Germany's defence spending plans and broader investor hopes that Trump's America First policies will encourage a wave of economic stimulus in the EU.
  • German stocks closed 1.1% lower, while French stocks gave up 0.4% and tariff-exposed car industry stocks on the region-wide Stoxx Europe 600 fell 1.8%.

Sources:

  • German Chancellor Friedrich Merz
  • French Prime Minister Francois Bayrou
  • European Commission President Ursula von der Leyen
  • White House statement
  • US Chamber of Commerce in the EU
  • Spanish Premier Pedro Sanchez
  • Alice Weidel, co-leader of Alternative for Germany
  • Reporting by Aime Williams in Washington, Alice Hancock in Brussels, Anne-Sylvaine Chassany in Berlin, Simeon Kerr in Turnberry, Ian Smith and Emily Herbert in London and Leila Abboud in Paris.

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