May 9, 2025 - 4:00pm
The deal Donald Trump struck with the UK is bad news for the EU on several levels. For starters, it is intended to signal a trade deal template, but it is the kind of deal the EU would never accept.
Unlike the UK, the EU runs a substantial trade surplus against the US. You cannot simply add the EU’s services deficit into this equation, as the European Commission does, as this number is contaminated by US companies producing in Europe and procuring services from the mothership. On the trade data alone, the EU had a surplus of some $230 billion last year, and there were record increases in the first few months of 2025, as exporters tried to beat the tariffs.
The talks with the EU are not going well. The Americans speak of cultural differences. The EU is not opening up on non-tariff barriers, for example on safety standards for car components, or on food safety. There is not much the EU can offer the US in terms of tariffs, and nothing much beyond the silly promises to buy more US gas, a promise which the EU is not in a position to make. The European Commission yesterday leaked a list of US imports worth €95 billion targeted for counter-sanctions — as a demonstration that it is serious. It also threatened WTO litigation. If you are serious about walking away, you should signal that. The new German government may not want the EU to walk away. From Berlin’s approach, it doesn’t seem like retaliation is an agreed strategy.
But we also have to be clear that a US-trade deal, if agreed, will not be attractive for the European Union. The US-UK deal means lower tariffs for US goods, and higher tariffs for UK goods. Trump still insists on a baseline tariff of 10% and it is unlikely he will shift his positions on European cars and steel and aluminium, as easily as he did for British cars. There are a lot more Mercedes, BMW and Porsches flowing into the US, compared to Jaguars or Aston Martins. If he were to exempt the European car industry from the tariffs, there would not be much point to having those car tariffs in the first place.
The Anglo-American trade deal looks like a political attempt to drive a wedge between the EU and the US. Trump said himself that the UK deal came first because of Brexit. It only really makes sense to see it in that light. If there is no deal between the US and the EU, we are looking at two competing tariff regimes with Western Europe. What happens, for example, if the US car that arrives tariff-free in the UK, then gets sold in the EU? Or the beef? In other words, the UK cannot have its US beef, and not eat it.
But it would not be wise to rule out a US-EU deal. The new German Chancellor Friedrich Merz might push the EU in a different direction, in which a deal may become possible. Merz talked to Trump yesterday for half an hour, we are told. The German leader is confident that he can cut a deal but he must beware the new soft-spoken Trump. It is even possible that he and Merz will hit it off splendidly, and yet no deal will be agreed upon.
Right now, we are in a situation where a deal is possible if the Europeans shift their position on regulation for cars and agricultural imports to some meaningful extent. And yet, it would not be a good deal for the EU. The question is whether this is better than no deal. This is really a trade-off between 10% and 20% tariffs, possibly even more for cars. Is it worth it? For some reason, it feels like a rehash of the deal-or-no-deal discussions we had during Brexit.
This is an edited version of an article which originally appeared in the Eurointelligence newsletter.
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