The US-EU trade deal is a landmark agreement that sets a baseline tariff rate of 15% on European goods, effective August 1, a significant reduction from the 30% rate threatened by President Donald Trump. This deal is expected to benefit certain sectors while harming others.
The winners of this deal include Donald Trump, who has hailed it as a major victory, claiming it will benefit both parties. The US energy sector is also a significant beneficiary, with the EU agreeing to purchase approximately $750 billion worth of US energy products over the next decade. American carmakers received a boost as the EU dropped its tariff on US-made cars from 10% to 2.5%, potentially leading to increased sales of American cars in Europe. The aviation industry also benefits from zero tariffs on certain “strategic products” like aircraft and plane parts.
On the other hand, US consumers may face increased costs due to the 15% tariff rate on EU goods, adding to their already heightened cost of living burden. The EU pharmaceutical industry is disappointed as the deal retains the 15% tariff rate for pharmaceuticals, contrary to their initial hopes for a total tariff exemption.
Carmakers in Germany, such as Volkswagen, Mercedes, and BMW, will still face significant costs despite the tariff rate being nearly halved to 15%. European solidarity is also strained, with some members giving cautious welcomes while others have been critical, like French Prime Minister Francois Bayrou, who commented, “It is a dark day when an alliance of free peoples… resigns itself to submission”.
The deal also has implications for the digital services sector, with the EU’s refusal to remove VAT on digital services directly harming US tech companies like Google, Apple, Meta, and Netflix. These firms will continue to face tax structures that reduce profitability and increase service costs for EU consumers.
Overall, the US-EU trade deal reflects a geopolitical reality where energy security and military dominance override consumer welfare and digital innovation. While the deal reduces the immediate threat of a trade war, it cements a system that prioritizes corporate gain over consumer benefit.