On Trump’s Tariffs, Europe Got the Best Deal Available
Despite the 15% headline rate, the effective tariff burden on EU exports has fallen — and Europe’s import share is rebounding. A commentary by Niccolò Rotondi and Daniel Gros
The recent publication of the new US national security strategy has starkly reinforced the impression that the US (or, at least, the present administration) no longer regards Europe as a reliable ally. Some commentators have taken this stance as a declaration of hostility against the EU that requires a firm response.
In this context, the EU-US ‘framework agreement’ of July on tariffs acquires new significance. It was widely interpreted as a capitulation, the inevitable result of a continent seen as "too weak and divided" to withstand Washington’s pressure, as the EU agreed to lower its own trade barriers against only minimal concessions from the US.
Many argued that, as a result of its divisions, Europe would have been far better off threatening immediate trade retaliation rather than accepting a deal interpreted as merely buying time.
However, the latest data allows us to check the initial effects of this agreement, and there is little sign that of a "capitulation".
First, the data confirms the relatively advantageous position of the EU in terms of access to the US market. The effective overall tariff rate on US imports from the EU has actually fallen since the agreement, now resting at around 6%. Crucially, EU goods now face one of the lowest trade barriers. Only Mexico and Canada fare better, as most of their exports to the US remain duty-free. Other US allies—treated with less public disdain in the security strategy, such as Japan or Korea—nonetheless face much higher rates (about 15 %), see chart below.
Second, the market share of the EU in US imports has rebounded since July, and is now close to its average over the last few years. This rebound is significant as overall US imports are stabilizing following the pre-tariff rush in March.
All in all, the reality is that the US has not translated its verbal hostility toward the EU into concrete action on the trade front. The EU, despite its perceived (and real) weakness and division, appears to have successfully navigated a difficult negotiation and secured the best outcome available, protecting its vital market access. It may not feel like a geopolitical victory, but the trade data suggest it was a very good deal.
The reason US trade policy vis-à-vis the EU has been rather cautious might be that the US depends on EU exports. A study by the German Institute der Wirtschaft has shown that there are thousands of product categories in which the EU provides more than one half of all US imports, more than the products where China dominates. This includes many industrial goods, like machines, that are essential to keep the US economy running.
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
