Donald Trump secured exactly what he wanted from the European Union on Sunday. Europe capitulated to the threat of devastating 30% tariffs. Was saving trade worth $600 billion in investments and a 15% tariff rate? European stock indices responded with gains of up to 1.2%, while oil rose to $68.18 per barrel, but economists warn of the deal’s asymmetric nature.
European Markets Celebrated Relief with Gains Up to 1.2%
European markets responded to the deal announcement with significant growth, reflecting investor relief from averting a trade war. Major indices recorded the following results:
- German DAX strengthened by 0.8%
- French CAC 40 rose by 1.2%
- British FTSE 100 added 0.5%
Oil markets also reacted positively to reduced uncertainty:
- Brent strengthened by 0.8% to $68.18 per barrel
- WTI crude rose to $65.71 per barrel
EU Promised Trump Massive Investments and Energy Commitments
While markets celebrated relief from averting a trade war, the deal’s structure reveals that America secured exceptional advantages. European countries committed to investments worth approximately $600 billion in the US economy and increased purchases of American energy by an additional $750 billion.
The deal structure includes differentiation based on strategic sector importance. Aircraft components and selected chemicals remain tariff-free, while the automotive industry faces a 15% tariff rate. For European investors, this means shareholders of automakers like Volkswagen or BMW face increased costs for US exports, which may pressure these companies’ margins.
Experts Criticize Unbalanced Deal: EU Pays Too High a Price
These advantages for America didn’t emerge without critical voices. Leading economists and political representatives warn of the deal’s unbalanced nature:
- Holger Schmieding (Berenberg): “The US takes away substantial tariff increases on EU imports plus secured additional EU concessions”
- Benjamin Haddad (French Minister for Europe): Called the deal “unbalanced” overall
- Cailin Birch (The Economist Intelligence Unit): “15% tariffs are still a major escalation step”
Significant uncertainty persists, with details regarding steel and pharmaceutical sectors remaining unclear. According to Morningstar analysis, the worst-affected sectors will include consumer goods, healthcare, and industrial companies.
For investors, this means practical portfolio impacts – shareholders of luxury companies like LVMH or automakers like Volkswagen may face declining profitability. Conversely, defensive sectors like energy and defense could become more attractive alternatives during periods of heightened uncertainty.
Japanese Precedent Repeats: Investments in Exchange for Trade Peace
This criticism operates within Trump’s broader strategy, which has precedents. The US-EU trade deal copies the pattern of the previous Japan agreement, which included $550 billion in US investments and the same 15% tariff rate.
These precedents indicate Trump’s tariff policies aimed at creating a baseline 15% tariff rate for cooperating partners, while non-cooperative countries face rates up to 50%. This strategy represents a dramatic shift from April’s tariffs, which set a baseline 10% rate for all US trading partners.
According to J.P. Morgan analysis, the average effective tariff rate should settle long-term at 15-18%, providing a reference framework for evaluating future trade deals.
Future of Transatlantic Trade Remains Uncertain
While the Japanese model provides some predictability for Trump’s trade strategies, key questions regarding long-term impacts remain unresolved. The US made no progress in crucial areas, including agricultural standards and regulatory norms in the technology industry. Negotiations with China continue in Stockholm to extend the tariff truce.
Long-term impacts on consumers will be asymmetric – European consumers will feel immediate price increases due to tariffs, while American consumers will face gradual cost increases.
For investors, the current deal means primarily one thing: The era of predictable trade relationships is definitively over. Monitoring further US negotiations with other partners will show whether the 15% rate truly becomes the new standard for “cooperating” countries.
