EU-US trade deal: European leaders back plan amid criticism

We're closing the blog. But you can find a helpful analysis of the deal here: Brussels settles — but at what price?

Wine and spirits have been left out of the initial trade agreement between the EU and the US, prompting producers and exporters to urge the European Commission to fight for US tariff reductions for the sector.

"The agreement... should confirm the restoration of bilateral trade, free of duties for spirits, which we are eager to see confirmed in the official documents," said Gabriel Picard, president of the FEVS federation of French wine and spirit exporters.

"When it comes to wines, everything is not settled yet, that is why we are encouraging the European Commission and France to fully commit to this final stretch, to obtain the reduction in customs duties on wines, a proposal supported by both American and European stakeholders," he added.  

Should the US levy a 15% import tariff on European drinks, says the Wine & Spirits Wholesalers Association, the result would be the loss of more than 17,000 jobs and $2.5 billion (€2 billion) of business in the US.

Italian winemakers, too, are fearing for their bottom line, with Lamberto Frescobaldi, president of the Italian wine producers' association, saying a 15% tax would directly translate into €317 million worth of losses over the next year. 

The US is the world's largest importer of Italian wine and spirits, accounting for one-fourth of the country's global sales. 

Italian wine exporters say that although expensive brands won't likely suffer, more affordable wines — already hampered by Italy's softening economy — will be hit hardest. 

European automakers on Monday are looking at yet another harsh reality beyond Asian competition and the cost of transitioning to electric powertrains — the long-term cost of yesterday's announcement of an unfavorable trade deal with the US.

Germany's VDA automobile manufacturers' association estimates the deal negotiated by European Commission President Ursula von der Leyen could cost the industry billions annually.

Despite von der Leyen's relief over a 15% US tariff on EU imports — down from a 27.5% punitive fee in April — the deal represents a six-fold increase over the previous 2.5% levied before Trump began his economic arm twisting. 

The EU, on the other hand, will slash import tariffs on US vehicles from 10% down to 2.5%, with observers saying this could eventually go down to 0%.

Despite these strong headwinds, two German manufacturers potentially stand to benefit, at least in part — with BMW and Mercedes now able to ship the SUVs they make in the US to Europe at lower costs.

Although European markets initially reacted with relief at the announcement of a trade deal between the bloc and the US, they all posted losses by day's end as the terms of the agreement came into focus. 

News of 15% tariffs was welcomed in the face of US President Donald Trump's threat of a 50% import tax, yet disappointment forced markets sharply into negative territory by the time EU stock markets closed.

Europe's leading exchange, the German DAX, climbed by 1% in early trading — nearly surpassing its recent record high — before closing at 23,970.36 points, down 1.02% overall.

With the US looking to benefit more than the EU, stocks in the Eurozone as well as in the UK and Switzerland also lost ground.

German automakers and manufacturers logged the biggest losses, with Porsche down more than 4%; and VW, Mercedes-Benz, Daimler Truck and others dropping between 1-3.7%.  

The United States and the European Union reached a trade agreement on Sunday that will see a 15% baseline tariff on most EU exports to the US while eliminating tariffs on certain products.

• European Commission President Ursula von der Leyen, who met President Donald Trump in Scotland on Sunday, hailed the agreement for the stability and predictability it brings
• The baseline tariff of 15% is lower than the 30% Trump threatened to impose on EU exports to the United States
• It will apply to about 70% of European goods imported into the US, including cars, computer chips, and pharmaceuticals
• Tariffs on aircraft and aircraft parts, certain chemicals, semiconductor equipment, certain agricultural products, and some natural resources and critical raw materials will be exempted from import tariffs in the US and EU
• Tariffs on European steel and aluminum will remain at 50%
• Von der Leyen said these would later be reduced and replaced by a quota system
• The EU pledged to make $750 billion in strategic purchases, covering oil, gas, nuclear, fuel, and chips during Trump's term in office
• The bloc also pledged to buy US military equipment as well as invest an additional $600 billion in the United States
• German Chancellor Friedrich Merz welcomed the deal, saying it avoided "needless escalation in transatlantic trade relations"
• Germany's Association of the Automotive Industry (VDA) has welcomed the end of a trade standoff with the US but warned that steep tariffs will burden manufacturers already under pressure
• The trade war-ending deal has been welcomed by most EU leaders, but with a significant dose of skepticism
• French Prime Minister Francois Bayrou said the deal amounted to "submission" by the EU

Russia's Foreign Minister Sergey Lavrov has said that the trade deal between the EU and the US will lead to the deindustrialization of Europe and that American energy will be more expensive than Russian resources. 

"It is clear that American energy resources will be significantly more expensive than Russian ones. It is clear that such an approach will lead to further deindustrialization of Europe and to the flow of investments from Europe to the United States," he said while speaking at a youth conference in Moscow.

"Of course, this will be a very strong blow, first of all, to energy prices and the outflow of investments for European industry and European agriculture.“

The EU has worked to decouple its economy from Russian energy since Moscow launched its invasion of Ukraine in February 2022.

France's Prime Minister, Francois Bayrou, says the European Union has yielded to the United States.

He expressed his disappointment with the "Van der Leyen-Trump" [sic] agreement.

"It's a dark day when an alliance of free peoples, united to assert their values and defend their interests, resigns itself to submission," he wrote on social media.

France has consistently urged the EU to take a tough stance in light of the tariff threats by US President Donald Trump. 

Just over two weeks ago, French President Emmanuel Macron said it was, "more than ever up to the Commission to assert the Union's determination to resolutely defend European interests." 

Germany's car sector has welcomed the end of a trade standoff with the US but warned that steep tariffs will burden manufacturers already under pressure.

"It is fundamentally good that a further escalation of the trade conflict has been avoided," said Hildegard Müller, president of the German Association of the Automotive Industry (VDA).

Müller said the crucial question was how the agreement would be structured in concrete terms and how reliable it would be.

"One thing is also clear," said Müller, "The US tariff of 15%, including for automotive products, will cost the German automotive industry billions annually and will burden them in the midst of the transformation."

Trump has also claimed the EU agreed to invest an additional $600 billion in the US and purchase $750 billion worth of US energy products. Müller said that, as a result, the EU must now urgently improve conditions for investors and businesses in Europe.

"In view of the far-reaching commitments for additional investments in the USA, the details of which are still open, the EU is now all the more urgently called upon to make the framework conditions in Europe internationally competitive for investors and companies in order to become more attractive and relevant as an investment location again."

The trade agreement framework between the United States and the European Union is worse than the deal the United Kingdom has with Washington, Hungarian Prime Minister Viktor Orban said Monday.

"Donald Trump did not reach an agreement with Ursula von der Leyen, but rather Donald Trump ate Ursula von der Leyen for breakfast," Orban said during a Facebook livestream.

The European Union and the United States reached a trade agreement Sunday that imposes a 15% tariff on most EU goods, higher than the United Kingdom's 10% tariff rate.

Orban, widely regarded as Trump's strongest ally in Europe, has previously said US tariffs were the result of Brussels' incompetence, according to his government.

France's European affairs minister, Benjamin Haddad, criticized what he described as an "unbalanced" trade deal between the EU and the US.

"The trade deal negotiated by the European Commission with the United States will provide temporary stability for economic actors threatened by American tariff escalation," Haddad said.

"But it is unbalanced," he stressed.

"Let's be clear: the current state of affairs is not satisfactory and cannot be sustainable."

France has long called for a tough line on the US tariff policy, as well as for the European Union to develop its strategic autonomy.

The Federation of German Industries (BDI) criticized the trade deal between the EU and the US, calling it an "inadequate compromise" that sends a "disastrous signal." 

The powerful industry lobby group said that the EU was accepting painful tariffs and that a 15% tariff rate is expected to have significant negative consequences.

"The only positive aspect of this agreement is that a further escalation spiral has, for now, been avoided," BDI said. 

It added that the lack of a deal on steel and aluminum exports was an "additional blow."

DW Correspondent Birgit Maass said that many in the EU and critics of Donald Trump would say that US President Donald Trump has strong-armed the EU to get concessions, using the leverage of his country's resources when it comes to security policy. 

"NATO and the US have been a big guarantor of European security. This obviously comes all in a mix. Europe needs the US not just for trade but also for the general security situation with a war in the continent of Europe, in Ukraine, and the threat that’s being posed by Russia." she said. 

Italy's Prime Minister Giorgia Meloni called the trade deal between the EU and the US "positive," but added that she would need to see the details. 

Italy is one of Europe's biggest exporters to the US, with a trade surplus of over €40 billion ($46.7 billion).

"I consider it positive that there is an agreement, but if I don't see the details I am not able to judge it in the best way," Meloni said. 

The country's national coalition-led government had pressed its European partners to refrain from a trade clash with the US. 

Meloni said in a statement that the deal "ensures stability". She added that the 15% tariff "is sustainable, especially if this percentage is not added to previous duties, as was originally planned."

The statement was also signed by coalition partners, Antonio Tajani of Forza Italia and Matteo Salvini of the League.

"We are ready to activate support measures at the national level, but we ask that they also be activated at the European level for sectors that will be particularly affected by US tariff measures," Meloni added.  

Irish Prime Minister Micheal Martin hailed the agreement between the European Union and the United States, saying that it will help "protect many jobs" in his country. 

"The negotiations to get us to this point have been long and complex, and I would like to thank both teams for their patient work," he said.

"We will now study the detail of what has been agreed, including its implications for businesses exporting from Ireland to the US, and for different sectors operating here," he added.

Martin also noted that higher tariffs will make trade between the EU and US more expensive and challenging. 

But he said the deal creates a "new era of stability" that could promote a deeper relationship between the EU and the US, which the Irish prime minister said was important for the global economy. 

"Given the very real risk that existed for escalation and for the imposition of punitively high tariffs, this news will be welcomed by many," Martin said.

The trade pact means the bloc would avoid the 30% tariffs that Trump had threatened on all goods from the EU on July 12. 

But it marks a significant compromise, especially given that European Commission President Ursula von der Leyen offered a "zero-for-zero tariffs for industrial goods" when talks began.

Still, von der Leyen said they agreed "zero-for-zero tariffs on a number of strategic products" including aircraft and aircraft parts, some chemicals, and certain agricultural products.

She added that the framework trade deal did not contain any decision regarding the spirits sector.

The trade pact will need to be approved by all 27 member states.