The United States and the European Union avoided the worst scenario: a devastating and widespread trade war between allies, which threatened to increase prices from a large number of products and slow down two of the world’s largest economies.
The deal brought a sense of relief to both sides – but few are celebrating the agreement itself.
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But it is significantly lower than the huge numbers Trump had been threatening if an agreement was not reached.
An agreement with the United States seemed impossible in late May. Frustrated by the lack of progress in negotiations with the 27 members of the European Union, Trump told the world on May 24 that he had closed conversations with some of the strongest allies in the United States.
“Our discussions with them are not taking anywhere!” Trump posted on Truth Social. “I’m not looking for an agreement,” he said later that day at the Oval Hall. “We defined the deal – it’s 50%.”
The statement – and the threat of frighteningly high tariffs – surprised European trade negotiators and incited European leaders to the action. They quickly agreed to accelerate negotiations.
Trump, who has special sympathy by the European Commission’s chairman, Ursula Von der Leyen, was influenced after she called him to say that the EU would commit to “quickly and decisively” to act. Trump soon retreated from the threat and said the negotiations would continue.
But an agreement between the United States and the European Union, one of the leading US business partners, remained undefined for months.
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Negotiators failed to reach a resolution before the initial deadline of July 9 – one of the reasons why the Trump government has postponed the effective date of its “reciprocal” tariffs to August 1.
With a few days left for the extended deadline, while Trump visited Scotland, he met Von Der Leyen and finished a structure for a deal – with few details and many caveats, but it was still a much sought after relief.
Avoiding the worst
With the agreement in force, two of the world’s largest economies avoided a potentially devastating trade war for the economy.
The United States kept a 50% tariff threat over Europe, and Europe threatened the United States with strategic retaliatory tariffs that threatened to harm US key industries.
Both sides seemed to accept the fact that an agreement was in force more than celebrating it.
“We got it,” Trump said as he announced the deal with von der Leyen. “It will work very well.”
. “Re -adjustment, but enable trade on both sides. Which means good jobs on both sides of the Atlantic, it means prosperity on both sides of the Atlantic, and that was important to us.”
The markets celebrated, in a way: Dow Jones futures rose 150 points, or 0.3%, about to open near record territory. S&P 500 futures rose 0.3% and Nasdaq’s futures rose 0.4%.
The United States and Europe “seem to have avoided a self -destructive trade war for now, in the largest and deepest business and investment relationship that the global economy knows,” said Jörn Fleck, senior director of the Atlantic Council’s European Center.
However, the details remain obscure. Europe will increase its investments in the United States by $ 600 billion and commit to buying $ 750 billion in US energy products.
The agreement eliminates rates on various items, including aircraft and aircraft parts, semiconductors, generic medications and some chemicals and agricultural.
The industries participating in the Zero fare agreement celebrated.
“Zero’s zero fare regime will increase jobs, strengthen our economic security and provide a US leadership structure in manufacturing and safety,” Airlines for America said in a statement.
But the 15% basic tariff applies to most products, so EU Member States-and American importers-will have to conform to the fact that higher tariffs will raise the prices of European products in the US.
“Higher rates mean higher prices for US consumers-and this will seriously harm the financial results of EU companies,” said Alex Altmann, vice-president of the British Chamber of Commerce in Germany.
“EU companies that seek to stay competitive in the US market will think twice as you decide where to produce or assemble.”
The agreement also represents another blow to the automakers of Detroit, who opposed something similar signed by the Trump government with Japan.
The 15% Imported EU cars rate for the United States is lower than the 25% rate that US automakers pay if their cars are manufactured in Mexico.
Although von der Leyen stated that pharmaceutical products were included in the initial agreement, she acknowledged that Trump could ultimately impose higher rates on imported drugs on the United States by undermining the deal.
Still, in the eyes of dedicated negotiators – and for the sake of the global economy – an agreement is better than any agreement. Now comes the difficult part: solve the details.
