The relief of clearing the uncertainty of a trade war thanks to the agreement sealed by Ursula von der Leyen, President of the European Commission, with Donald Trump has barely lasted 24 hours in Europe
"Submission" or "humiliating" are terms that define the astonishment with which the pact has been received in political and industrial circles throughout the continent, a pact that the European Commission tried to explain from a pragmatic standpoint and that is the result of four months of negotiations in which the EU considered using a response at the level of U.S. aggressiveness to assert itself at the negotiating table.
The outcome has been different, and the EU reluctantly accepts tariffs and astronomical spending and investment commitments without getting anything in return other than appeasing the U.S. president. It is a balance that was strongly questioned yesterday by the governments of the member countries and by the industry and business sectors that will suffer the direct consequences of the agreement.
France and Germany, the two members that together represent the strength of the EU, express completely opposing opinions openly, something uncommon in EU politics.
French Prime Minister François Bayrou strongly criticized the agreement reached by von der Leyen, describing last Sunday as "a dark day" for Europe.
Bayrou expressed his frustration at the fact that "an alliance of free peoples, gathered to affirm their values and defend their interests, has resigned to submission."
Bayrou's comment was not isolated in Paris. "I don't want us to dwell on what happened on Sunday," said Saint-Martin, referring to the agreement sealed in Scotland. "It would be like assuming that Europe is not an economic power. Is the European Union a force? If we want the answer to be yes, then nothing is decided yet."
In Spain, Pedro Sánchez expressed his "respect without enthusiasm" for the agreement, while in Italy, everyone is waiting to know the "fine print" of the pact, something that all economic sectors of the 27 are waiting for to assess the damage that the new tariff schedule may cause to their businesses.
Von der Leyen does have the strong support of German Chancellor Friedrich Merz, who welcomed the agreement despite strong criticism from industrial and financial sectors, which speak of humiliation and anticipate massive losses.
According to Merz, with the agreement sealed yesterday in Scotland, "a trade conflict that would have severely affected the export-oriented German economy has been avoided." The chancellor, who even thanked the President of the European Commission and the Trade Commissioner, Maros Sefcovic, for the "arduous work done," highlighted the unity of the European Union in the process.
Merz added that Europe has been able to defend its fundamental interests, although he would have liked more ease in transatlantic trade. "Stable and predictable trade relations with market access for both sides benefit everyone, both on this side of the Atlantic and the other, both companies and consumers," he said.
In the same vein, albeit less enthusiastic, Federal Finance Minister, the Social Democrat Lars Klingbeil, stated that the fact that a negotiated solution has been reached is "good, for now". The outcome of the negotiations and their repercussions on the economy and employment in Germany will now be evaluated by the federal government, according to the Vice Chancellor. "It is important that Europe has defended its interests," he said.
The reactions from the economic sector have been quite different. Clemens Fuest, President of the Institute for Economic Research (IFO), a leading institution in Germany, believes that "the lopsided trade agreement is a humiliation for the EU, but reflects the real power dynamics."
"Those who lag behind economically and cannot protect the security of their citizens without the U.S. should not be surprised by the humiliation. Let's hope that Europeans learn from this: strengthen economic power, stay united, and reduce military and technological dependence on the U.S."
After tough negotiations, the EU and the U.S. reached an agreement to ease the tariff conflict created by Trump. The 30% tariffs on European imports that Trump had threatened to impose starting on August 1 are avoided, but at the cost of concessions from the EU with serious consequences for its economy. The EU not only accepts 15% tariffs on most of its exports to the U.S., but also commits to buying American energy worth $750 billion until the end of his term. According to von der Leyen, liquefied natural gas (LNG), oil, and nuclear fuels from the U.S. will cover the gaps that will occur after the complete abandonment of Russian gas and oil, hinting at the economic geostrategy behind it. Additionally, the EU promises to invest another $600 billion in the U.S. in the coming years.
But Fuest is not the only one criticizing the agreement. The Federation of German Industries (BDI) also sees nothing positive in it. "The agreement is an insufficient compromise and sends a fatal signal to the closely interconnected economies on both sides of the Atlantic," the association declared in Berlin. The EU accepts painful tariffs, as even a 15% rate will have enormous negative repercussions. The fact that no agreement has been reached on steel and aluminum exports is an "additional blow."
On the other hand, the German Federation of Wholesale, Foreign Trade, and Services speaks of a "painful compromise." Every percentage point of tariffs is one too many. The new tariffs pose an existential threat to traders, supply chains will be disrupted, and prices will increase. Europe must strengthen trade agreements with other economic regions. The German government must also support non-industrial SMEs.
Michael Hüther, Director of the German Economic Institute in Cologne, warned that there could be more uncertainties. "We cannot trust that calm will now prevail, especially because purchase and investment commitments are difficult to fulfill precisely. Trump never completely withdraws the threat of tariffs," he stated.
According to the Association of the Automotive Industry (VDA), the annual costs for German automotive industry companies are estimated in the billions, although it is a sector that benefits from the 15% as it represents a de facto reduction of almost 13%.
The IFO believes that the German economy can cope with the 15%, but "it is a significant deterioration compared to the situation before Trump's new term, which can only be partially offset, and only in part, by increasing exports to other countries."
Monika Schnitzer, President of the Council of Economic Experts, considers the economic repercussions of the tariff agreement for Germany as "manageable," although growth could be between 0.2 and 0.3% lower than what would have been recorded without these tariffs. "The ability of companies to cope with this situation will depend on whether they can increase their productivity and how quickly they do so," she argues.
Economist Julian Hinz from the Kiel Institute for the World Economy (IfW) has calculated a decrease in GDP for the entire EU of 0.1% within a year. In Germany, this would lead to a GDP drop of 0.15%. This would mean a loss of around 6.5 billion euros.