Paying to Play: Europe's Costly Concessions in Trump's New Trade War
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For years, some Europeans have dreamed of a giant free trade deal between the European Union and the United States. Many rounds of negotiations took place starting in 2013 to try to deliver what was dubbed the Transatlantic Trade and Investment Partnership (TTIP). Its proponents said such a deal would establish an economic Nato, creating an economic relationship as deep as the security partnership; some say that the failure of those negotiations in 2016 as a result of stubbornness on both sides contributed to Brexit. Various half-hearted attempts have been made since then to resume limited trade liberalisation talks.
No one at any point during those years could have imagined that when the EU-US trade deal came, it would look like the humiliating surrender agreed by Ursula von der Leyen in an awkward meeting with Donald Trump in Scotland on Sunday. The Commission president agreed to a deal under which most EU exports would be taxed at 15 percent when they entered the US, up from around 2 percent pre-Trump. This is an outcome that would have been unthinkable just three weeks ago, when Brussels thought it had a deal for a 10 percent deal, let alone three months ago, when von der Leyen was hoping to negotiate a zero-for-zero tariff deal.
Worse, the EU is being charged even for the privilege of trading with the US on these abased terms. Von der Leyen has committed that the EU will buy $750 million of US energy products over the next three years and invest $600 billion in the US economy. How this will work in practice is unclear since details are scarce and both sides have given contradictory briefings. On the face of it, the energy promise looks a particular stretch since it would require the EU to divert the bulk of its annual €375 billion energy spend to the US. Currently it buys just 17 percent of its oil, its biggest energy import, from the US. Perhaps these are just numbers plucked out of thin air to please Trump and not meant to be taken seriously.
EXCLUSIVE
Trump Made 'Mistake of Historic Proportions' on Ukraine Says His Former Ambassador
The United States' former ambassador to Ukraine, Bridget Brink, tells Alexandra Hall Hall that she couldn't "in good conscience" execute the President's plans for the country
Alexandra Hall Hall
What the EU gets out of this hopelessly one-sided arrangement is simply the chance to avoid what could have been an even worse outcome. Had no deal been reached, Trump was threatening to impose a 30 percent tariff on all EU imports from August 1. The best that can be said for this deal, from a European perspective, is that in accepting a baseline 15 percent tariff, European businesses will avoid some of the much higher tariffs that Trump has introduced for certain sectors, most notably automotive imports, although it seems not steel and aluminium. On the basis that 15 percent becomes the new baseline tariff for most countries, other than the UK which will receive a tariff of 10 percent, the EU will at least not be at a competitive disadvantage.
Meanwhile, Trump has not had it all his own way. The US president has had to abandon his demand that the EU change aspects of its regulations on sectors such as digital services, pharmaceuticals and agriculture to suit US corporate interests. The irony is that this was the one thing that US businesses wanted out of a trade deal above all else. Indeed, removing such barriers to trade was the focus of the TTIP negotiations and subsequent EU-US trade initiatives. In surrendering this core US interest and prioritising instead tariff revenues, Trump has delivered to US businesses the worst of both worlds: higher taxes and no enhanced market access.
'What Trump's Ukraine U-Turn Really Tells Us About His Psychology'
Trump's shift from betraying Ukraine to turning on Putin reveals a lot about the man and hi...
Packed with exclusive investigations, analysis, and features
SUBSCRIBE TODAY
For years, some Europeans have dreamed of a giant free trade deal between the European Union and the United States. Many rounds of negotiations took place starting in 2013 to try to deliver what was dubbed the Transatlantic Trade and Investment Partnership (TTIP). Its proponents said such a deal would establish an economic Nato, creating an economic relationship as deep as the security partnership; some say that the failure of those negotiations in 2016 as a result of stubbornness on both sides contributed to Brexit. Various half-hearted attempts have been made since then to resume limited trade liberalisation talks.
No one at any point during those years could have imagined that when the EU-US trade deal came, it would look like the humiliating surrender agreed by Ursula von der Leyen in an awkward meeting with Donald Trump in Scotland on Sunday. The Commission president agreed to a deal under which most EU exports would be taxed at 15 percent when they entered the US, up from around 2 percent pre-Trump. This is an outcome that would have been unthinkable just three weeks ago, when Brussels thought it had a deal for a 10 percent deal, let alone three months ago, when von der Leyen was hoping to negotiate a zero-for-zero tariff deal.
Worse, the EU is being charged even for the privilege of trading with the US on these abased terms. Von der Leyen has committed that the EU will buy $750 million of US energy products over the next three years and invest $600 billion in the US economy. How this will work in practice is unclear since details are scarce and both sides have given contradictory briefings. On the face of it, the energy promise looks a particular stretch since it would require the EU to divert the bulk of its annual €375 billion energy spend to the US. Currently it buys just 17 percent of its oil, its biggest energy import, from the US. Perhaps these are just numbers plucked out of thin air to please Trump and not meant to be taken seriously.
EXCLUSIVE
Trump Made 'Mistake of Historic Proportions' on Ukraine Says His Former Ambassador
The United States' former ambassador to Ukraine, Bridget Brink, tells Alexandra Hall Hall that she couldn't "in good conscience" execute the President's plans for the country
Alexandra Hall Hall
What the EU gets out of this hopelessly one-sided arrangement is simply the chance to avoid what could have been an even worse outcome. Had no deal been reached, Trump was threatening to impose a 30 percent tariff on all EU imports from August 1. The best that can be said for this deal, from a European perspective, is that in accepting a baseline 15 percent tariff, European businesses will avoid some of the much higher tariffs that Trump has introduced for certain sectors, most notably automotive imports, although it seems not steel and aluminium. On the basis that 15 percent becomes the new baseline tariff for most countries, other than the UK which will receive a tariff of 10 percent, the EU will at least not be at a competitive disadvantage.
Meanwhile, Trump has not had it all his own way. The US president has had to abandon his demand that the EU change aspects of its regulations on sectors such as digital services, pharmaceuticals and agriculture to suit US corporate interests. The irony is that this was the one thing that US businesses wanted out of a trade deal above all else. Indeed, removing such barriers to trade was the focus of the TTIP negotiations and subsequent EU-US trade initiatives. In surrendering this core US interest and prioritising instead tariff revenues, Trump has delivered to US businesses the worst of both worlds: higher taxes and no enhanced market access.
'What Trump's Ukraine U-Turn Really Tells Us About His Psychology'
Trump's shift from betraying Ukraine to turning on Putin reveals a lot about the man and hi...
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