The EU Trade Deal: Playing for Time

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Yesterday, Trump invited Ursula Von der Leyen for a lecture on windmills and a big announcement of a trade deal.

In theory and as laid out, Trump used threats of 30% tariffs to get the EU to capitulate to his demands, accepting 15% tariffs on goods exported to the United States rather than the 10% he was proposing weeks ago, before the Ghost of Jeffrey Epstein made him feel weak.

“The golf was beautiful,” Trump told reporters. “Even though I own it, it’s probably the best course in the world. And I look over the horizon and I see nine windmills at the end of the 18th. I say, isn’t that a shame?”

Trump said the EU will agree to purchase $750 billion of energy. It will also agree to invest $600 billion more than planned in the U.S.

Von der Leyen said the 15 percent tariff rate would be a ceiling, with the same rate applying to cars, pharmaceuticals and semiconductors. The tariff treatment for alcoholic drinks has still to be worked out.

Europe would replace Russian gas with purchases of energy from the U.S. with purchases of $250 billion per year for the rest of Trump’s term, she added. [my emphasis]

While no one seems to be addressing this, the EU reportedly did not budge on EU regulations on tech, one of the things Trump had been pushing for.

US consumers will be taxed on EU goods — with some carveouts. But EU consumers won’t be taxed on US goods (which are already cheaper because Trump is destroying the dollar).

In theory, this creates the same perverse incentive structure as the Japanese deal did, in which Japanese companies pay a lower tariff, 15%, on cars than US producers pay for inputs, 50%. In theory, the Japanese deal could lead Toyota and Honda to move jobs out of the United States. The EU doesn’t have that kind of brand impact in the US, however, meaning Volkswagen is badly hit by the tariffs but not in a strong enough position to simply revert production to Germany (or some place cheaper in the EU).

The tariffs will impose some of the biggest costs on Ireland, since it exports a lot of pharmaceuticals to the US (and that production may be one of the easier things to return to US production). Meanwhile, goods exported from Northern Ireland face a 5% lower tariff.

Meanwhile, France’s Prime Minister is already condemning the deal.

France called a framework trade deal between the United States and European Union a “dark day” for Europe, saying the bloc had caved in to U.S. President Donald Trump with an unbalanced deal that slaps a headline 15% tariff on EU goods while sparing U.S. imports from any immediate European retaliation.

The criticism from Prime Minister Francois Bayrou followed months of French calls for EU negotiators to take a tougher stance against Trump by threatening reciprocal measures — a position that contrasted with the more conciliatory approaches of Germany and Italy.

“It is a dark day when an alliance of free peoples, brought together to affirm their common values and to defend their common interests, resigns itself to submission,” Bayrou wrote on X of what he called the “von der Leyen-Trump deal”.

I can’t help but think that this deal is just a holding pattern. After all, Trump plans to discuss with Keir Starmer today the deal he made with the UK back and May and was signed back in June. Every other deal he has “made” has led immediately to a dispute about what the countries really agreed to. Deals don’t actually get finalized for months after the deal. And Van der Leyen is kidding herself if you think Trump will be locked in to anything.

Meanwhile, as noted above, there’s no deal yet on how much Trump will tax French wines and other fancy European booze.

That’s notable given that Trump’s appeal of lower court rulings that his tariffs are unlawful, in part, because they’re so arbitrary and capricious will be Thursday at 10AM. And the lead plaintiff in that case is a wine importer, still looking for clarity on how much they’ll pay to import wines from, among other places, Austria, Italy, Greece, Spain, France, Germany, Croatia, and Hungary, over a 100 days after suing.

Plaintiff V.O.S. Selections, Inc. is a 39-year-old New York-based business, founded by Victor Owen Schwartz, that specializes in the importation and distribution of small-production wines, spirits, and sakes from six continents. V.O.S. Selections has made and makes significant direct purchases of wines, spirits, and sakes from Austria, Italy, Greece, Lebanon, Morocco, Spain, France, Portugal, Mexico, Argentina, Germany, Croatia, Hungary, and South Africa. The products it imports are not reasonably available from a producer in the United States.

If the Circuit Court of Appeals upholds (or preferably, improves) the lower court ruling, then this whole process will be thrown back into chaos until SCOTUS tells us whether their expansive view of the presidency extends to roiling international trade agreements every time he gets grumpy about a sex trafficking scandal.

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8 replies
  1. Verrückte Pferd says:

    I haven’t seen anything here in Deutschland where Orban’s Hungary is exempted from the tariff.
    More complications for the Grifter?

    • ernesto1581 says:

      Do complications really matter, given that, “Every other deal he has ‘made’ has led immediately to a dispute about what the countries really agreed to,”?

      VOS Selections is exactly the kind of small business and business owner everyone seems to agree represents the soul of American entrepreneurial activity. It provides a quality product, with service to match; it operates on a margin just large enough to keep the company in business and the owners in nice wines. (Which may fairly describe their mission statement.)
      Nevertheless, I imagine it will only be a matter of time before Trump damns it to hell along with all the other persons, places & things he finds standing in his way.

    • Verrückte Pferd says:

      Certainly the position of Hungary will make it complicated for the EU as well.
      Not that any of this deal smacks of reality.

  2. Amateur Lawyer At Work says:

    This is the frameworks towards an understanding of a deal, not an actual deal. “Cici n’esst pas une pipe.”
    The “price” to buy energy from US instead of Russia? Did Trump’s buddy Vlad approve? I betcha the EU’s negotiators whined and complained about the requirement in the room, but high-fived each other outside the room.
    As far as tech regulation goes, that is huge but will almost immediately create the “deal” to blow up because the EU both has AND ENFORCES anti-trust law. Amazon, Meta, etc. will continue to be hit with actual concerns about concentrated economic power.
    Finally, I shed no tears for Ireland. They spent years tearing down the guardrails, ripping out floorboards, and undermining their foundations to offer tax incentives to Pharma (and, Pre-2008, banking) to become a single-industry export-driven economy. Congrats to them, but the music has to end.

  3. BreslauTX says:

    Bloomberg had a writeup about the Energy part of the deal being fantasy, but now I am hitting a paywall on their web site and am unable to access it a second time.

    Perhaps I will dig for data and duplicate some of what Bloomberg pointed out.

  4. BreslauTX says:

    Found much the same writeup at NBC.

    https://www.nbcnews.com/business/economy/eus-250-billion-year-spending-us-energy-unrealistic-rcna221516

    E.U.’s $250 billion-per-year spending on U.S. energy is unrealistic

    Total U.S. energy exports to all buyers worldwide in 2024 amounted to $318 billion. Of that, the E.U. imported a combined $76 billion.

    BRUSSELS — The European Union’s pledge to buy $250 billion of U.S. energy supplies per year is unrealistic because it would require the redirection of most U.S. energy exports towards Europe and the EU has little control over the energy its companies import.

    The U.S. and EU struck a framework trade deal on Sunday, which will impose 15% U.S. tariffs on most EU goods. The deal included a pledge for the EU to spend $250 billion annually on U.S. energy — imports of oil, liquefied natural gas and nuclear technology — for the next three years.

    Total U.S. energy exports to all buyers worldwide in 2024 amounted to $318 billion, U.S. Energy Information Administration data showed. Of that, the EU imported a combined $76 billion of U.S. petroleum, LNG and solid fuels such as coal in 2024, according to Reuters’ calculations based on Eurostat data.

    More than tripling those imports was unrealistic, analysts said.

    Arturo Regalado, senior LNG analyst at Kpler, said the scope of the energy trade envisioned in the deal “exceeds market realities.”

    “U.S. oil flows would need to fully redirect towards the EU to reach the target, or the value of LNG imports from the US would need to increase sixfold,” Regalado said.

    There is strong competition for U.S. energy exports as other countries need the supplies — and have themselves pledged to buy more in trade deals.

    Japan agreed to a “major expansion of U.S. energy exports” in its U.S. trade deal last week, the White House said in a statement. South Korea has also indicated interest in investing and purchasing fuel from an Alaskan LNG project as it seeks a trade deal.

    Competition for U.S. energy could drive up benchmark U.S. oil and gas prices and encourage U.S. producers to favor exports over domestic supply. That could make fuel and power costs more expensive, which would be a political and economic headache for U.S. and EU leaders.

    Neither side has detailed what was included in the energy deal — or whether it covered items such as energy services or parts for power grids and plants.

    The EU estimates its member countries’ plans to expand nuclear energy would require hundreds of billions of euros in investments by 2050. Its nuclear reactor-related imports, however, totalled just 53.3 billion euros in 2024, trade data shows.

    The energy pledge reflected the EU’s analysis of how much U.S. energy supply it could accommodate, a senior EU official said, but that would depend on investments in U.S. oil and LNG infrastructure, European import infrastructure, and shipping capacity.

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