15 percent tariffs on most products, breaches of WTO rules, growing tech and gas dependencies: Few are content with the EU-US trade deal. Some believe that this was the most the EU could get from the US; others see the EU’s timid response to US tariffs as a missed opportunity to protect its interests. In France, Prime Minister Bayrou even spoke of a “dark day” and an act of “submission”. This narrative misses the point: Sunday’s deal was not a one-off accident in a well-ordered EU trade environment. It reveals deep structural weaknesses in the EU’s approach to trade. If the EU fails to address them, future negotiations will not lead to better results.
Blaming Brussels instead of owning up
France’s indignation at the result is more than ironic: The EU Commission never goes into high-stakes negotiations like this one without first speaking to national capitals, and Paris is especially influential. One key reason for the Commission’s inability to get a better deal is that it did not have a more robust negotiating mandate. Instead of taking joint responsibility, member states undermine the EU’s negotiating position: They point to Brussels instead of owning up themselves; in public, they demand forceful retaliation, which they ultimately don’t support when push comes to shove. A divided EU is able to agree to an unsatisfactory compromise. For an assertive response, which can have high costs in the short term, the member states would need to stand united behind the Commission.
Too dependent for confrontation
The EU’s bargaining space is constrained by the fact that not only trade is at stake in transatlantic relations. The US administration brings the EU’s security dependence to the negotiating table, as well as its support to Ukraine. Beyond immediate security concerns, the EU depends on the US for certain key technologies and infrastructures, especially in the digital realm. This creates additional potential for coercion. In the medium- to long term, it is possible to reduce these dependencies. For now, however, they determine how much confrontation the EU can afford – with the US, but also with China, given the EU’s massive dependence on Chinese raw materials exports.
Expecting others to pay
Even in the absence of strategic dependencies, national interests open the door to blackmail by others. On the one hand, member states differ in their dependence on exports to the US – they account for 3.4 percent of Slovakia’s GDP, in Cyprus, a mere 0.16 percent – on the other, many states that are hit especially hard, such as Italy, lack fiscal space to support their economies. In an early stage of the negotiations, France insisted that US bourbon be removed from the EU’s counter tariffs, out of fear that the US could target its Cognac industry – which amounts to less than 0.02 percent of the EU’s annual GDP. Member states are unwilling to pay the price a strong European response could have – even those who could afford it, such as Germany. Instead, they put their own interests first. Berlin has pushed for a quick deal with the US to avoid even higher tariffs for German carmakers. This certainly hasn’t strengthened the EU’s position.
From dogmatism to double standards
Since the founding of the WTO, the EU has styled itself as the model student of trade multilateralism within it. It also demands strict adherence to trade rules from its trading partners. The crisis of WTO dispute settlement hasn’t changed this, and neither has the WTO’s inability to protect core EU interests, for example when it comes to industrial subsidies and manufacturing overcapacities. Under US pressure, the EU has now abandoned this adherence to the rules – and lost its credibility in the multilateral system: The promise of bilateral zero-for-zero tariffs with the US on a range of products is a clear breach of WTO rules. The EU has not found a way of reconciling its principles and its interests. Like its member states, when push comes to shove, it isn’t ready to put its money where its mouth is, for instance by retaliating against illegal tariffs and not refusing an agreement that violates WTO rules. This cements others’ impression that the EU operates with double standards.
The EU-US deal is no long-term trade agreement, but a truce; it is upheld not through legal enforcement mechanisms, but with incentives and credible threats in case it is breached. For now, the EU and its member states have bought some time. If they want a better result in the next round of negotiations, they should use this time to address the structural weaknesses of their trade policy.
Etienne Höra is Project Manager in the Europe's Future program at the Bertelsmann Stiftung.
