EU-US Agreement: an Armistice that is Timely if Given the Means

With the last episodes of the French political and budgetary show behind us, the announcement of an agreement between the European Union and the United States on Sunday 27 July shook off the torpor of a summer finally taking shape. The prospect of Europeans meekly accepting a 15% tariff on their exports to the United States became official. This is undoubtedly an extraordinary event and, in terms of deliberately inflicted external shocks, it has been unmatched since 1945, except for the oil shocks of the 1970s. However, beyond the passions of a French debate that is known neither for its subtlety nor for its benevolence towards the EU or the United States, any final judgment seems hasty. The litany of indignation that has followed on the part of French politicians and, more seriously, of many public figures who could have been expected to play their didactic role, says more about us than about the agreement. The best proof is that most have been fortunate enough to find their favorite target to blame, from the Americans to our dependence on hydrocarbons, to the President of the Commission or the President of the Republic. An agreement with such violent effects, negotiated under such brutal conditions, in such a delicate moment, deserves better than a choreography of pre-established judgments. 

A Surely Ssymmetrical Agreement with Uncertain Details

First, what do we really know about this agreement? As with all the trade agreements of a Trump administration fond of staging the sensational announcements of its president, we can only refer for the moment to the general and not entirely converging terms of each of the parties: no official writing has yet been made public. Given the respective liabilities in terms of reliability, we will refer in preference to the European elements.

Before delving into the substance, let’s pause on the uncertainty surrounding the precise content of the agreement, which is not so trivial. To obtain definite details, we will have to wait for the text agreed upon by each of the parties, as promised by the Commission. Incidentally, it will probably only be a political agreement at first, i.e. a non-binding commitment on autonomous actions by each of the partners. Unlike a proper trade agreement, the transparency obligations, the validation process and the enforcement mechanisms are not defined and would be at best superficial. A trade agreement could follow at a later stage, conditioned to further negotiations, but we will come back to that later. Those unusual outcomes for a very legalist EU might push Europeans to reappreciate the virtues of the cumbersome negotiations of our ambitious multi-dimensional agreements.

The member states are therefore renouncing the retaliatory measures that this gross violation of international law allows, and which they had prepared. This tariff applies on August 1st, replacing the +10% increase applied since April (i.e. approximately 14% on average, given the initial level), and thus the +30% threat for that date. Tariffs remain unchanged for goods subject to a tariff level exceeding this 15%.

Unlike the agreement with the United Kingdom (+10%), the 15% is the level applied and not the increase. While this may seem peaky in view of the average pre-2025 US tariffs on European goods, around 3.5%, many sensitive products are already subject to customs duties of more than 5%, particularly in the agricultural sector or for the automotive industry, which reduces the scale of European concessions.

Another acute dimension for Europeans is vehicles. Since April, those have been subject to tariffs of 27.5%, applying to all countries in the world with a few exceptions. European products will therefore benefit, in practice, from a specific reduction with this 15% tariff. Pending new US agreements with other countries, vehicles produced in Europe have hence a serious competitive advantage over most of their competitors - with the exception of the United States. Even in the latter case, inputs such as steel and aluminum, which are subject to 50% tariffs, would need to be competitive.

Exemptions supplement these 15%. Under a zero-for-zero framework announced in European communications, aerospace and minerals would be duty-free, probably as early as August 1. In addition, there are "certain" chemicals, pharmaceuticals, agricultural and semiconductor products. The effectiveness, scope and especially date of these second exemptions appear more uncertain. According to a scope yet to be specified, all these exceptions would cover 10 to 20% of EU exports to the United States.

Finally, the rest of the semiconductor and pharmaceutical sectors would see the duties that prevailed before these tensions, which were close to zero, maintained at least until the conclusion of the national security investigations the Trump administration initiated into these sectors. Once these are concluded, in the coming months, any duties would remain subject to the 15% ceiling for European goods, according to the Commission. Still based on the Commission's official publications, quotas for steel, aluminum and copper at preferential duties are also part of the deal (compared to 50% currently). These seem opportunely conditional on a strengthening of barriers against subsidized Chinese exports, which the EU had already formally on its agenda for several months.

However, European concessions are not limited to the acceptance of these new barriers. We would have relinquished our rights to the majority of US industrial goods, averaging 1%. That said, the implementation - the date of which is not specified - appears uncertain. The EU's legal framework for making these changes is constraining. A formal trade agreement with the United States would certainly be required, probably in connection with some of the exemptions mentioned earlier. Statements by both parties describing the agreement as a "step" and insisting on the continuation of negotiations, notably by the French authorities on certain sensitive sectors (wine, spirits, pharmaceuticals), support this interpretation.

Finally, we must consider what the agreement does not seem to address. Among the flurry of initial demands by the Trump administration, many Republicans seemed determined to obtain a total strategic alignment of the Europeans on a potential China agenda from Washington, as well as a non-implementation of our tax, digital or agricultural regulations. The vague terms used by both parties on these matters, when they are not outright absent, confirm press reports about the absence of such commitments. These compromises of our sovereignty have been avoided, at least for now. Nevertheless, the emphasis placed in US communications on future European telecoms legislation betrays risks regarding regulations currently being drafted. 

Overall, the agreement is therefore an armistice enshrining a scandalously unbalanced status quo established by the early April protectionist turn of the new US administration. In the game of comparison with the other beneficiaries of a "deal", the EU seems to have received a very slightly more favorable treatment than the best performers in this area, namely the United Kingdom or Japan. Canada and Mexico, which have a long-standing free trade agreement with the United States, are expected to maintain a more favorable situation, but are the subject of intense negotiations largely separated from those of the rest of the world. India and Brazil, which were unable to reach an agreement, were hit with tariffs of 25% and 50% respectively.

If current trends continue, European productions could therefore emerge slightly better-off than their foreign competitors on the US market. This is a small consolation in light of the asymmetry of the deal, but a consolation nonetheless, especially for sectors where local competition is weak. 

A Delaying Accommodative Tactic

This conciliatory approach, while frustrating and humiliating, is not without justification.

It is important to remember that tariff increases primarily affect the country that imposes them, making consumption and inputs more expensive, especially when they apply to all partners. The massive stocks built up by companies ahead of the announced protectionist shift have certainly delayed its impact. Indeed, the latest consumer price figures indicate a resurgence of inflation on goods. Annual growth in the consumer price index jumped from 2.4% in May to 2.7% in June, the highest monthly growth in four years if cars are excluded. Furthermore, the honeymoon period at the start of the presidential term, particularly strong in the United States, seems to be eroding fast. In addition to the opinion polls, first cracks in the unity of the Republicans' votes have emerged in Congress, particularly on trade issues. 

Legally speaking, given the activated instruments, the procedures underway and the first decisions rendered, the US executive branch should soon find itself with less freedom in conducting its trade wars. At the very least, Congress, which is rather divided on these issues, should regain its prerogative to control these tariff measures, which is traditionally tight in the United States. Finally, the prospect of midterm elections in 15 months will also weaken Washington's negotiating position. Keen to maximize their chances of maintaining their narrow majorities, Republicans will be less willing to engage in trade disputes with partners who will not hesitate to target the productions of sensitive states. 

Not to mention, and as regrettable as it may be, that the United States provides the old continent with its nuclear deterrent, the majority of its ammunition, and almost all of its digital tools, while being also necessary for our energy security. In any case, France, with its quasi-structural external and public deficits, whose main exports are luxury goods and tourism, seems ill-positioned to claim otherwise. 

The Urgency of Power

This more nuanced picture does not prevent us from acknowledging the considerable challenge posed by such a conciliatory European approach. The credibility of Europeans in defending their interests, already not outstanding, is seriously undermined. Faced with the return of brutal power relations in international relations, the medium-term consequences could be dramatic.

Our delicate situation deserves better than to attack an agreement that merely reflects our weaknesses, or a Commission with a tightly-monitored mandate from the Member States. Defence, energy, budget, finance, digital, technology, competitiveness... These are the vulnerabilities that are to blame.

The immense efforts required to overcome this geopolitical impotence deserve better than comforting anathemas. We will not, in the short term, acquire all the panoply of power that the French spirit likes to claim. The work will be long. And, as disappointing and frustrating as the European discussion may be, it is at this level that we will be able to effectively achieve a power capable of facing a world of predation and empires. The transatlantic trade armistice should therefore be judged more in terms of the forces it will enable us to (re)build than in terms of the sad equilibrium it freezes.
 

Copyright image : Brendan SMIALOWSKI / AFP
Donald Trump and Ursula von der Leyen in Turnberry, Ireland, July 27, 2025