20 August 2025
The coercive new trade deal with the US exposes the EU’s inability to defend its interests in an era of power politics. By accepting unfavourable terms and leaving its planned deterrence tools unused, Europe signalled that economic pressure works. This risks undermining both its strategic autonomy and the rules-based trade order it claims to uphold.
A new trade deal between the United States and the European Union was concluded in late July under threats of escalating tariffs from President Trump. This episode exposed a fundamental weakness in Europe’s ability to defend both its economic and political interests, as well as the rules-based international economic order. For years, the EU has spoken with growing urgency about strengthening its economic security against the weaponisation of international economic linkages, and has positioned itself as a bastion of rules-based international trade. Yet in its confrontation with Trump, this rhetoric failed to translate into action.
Europe accepted a 15% tariff baseline on most exports to the US, which, while lower than the threatened 30%, is still far higher than Trump’s 10% “liberation day” tariffs, and ten times higher than the 1.47% average before the trade war. Strategic sectors such as steel, aluminium, and copper remain subject to the 50% tariffs imposed by Trump in June. In return, the EU has agreed to grant tariff-free access to US goods entering its market. It has also pledged to purchase hundreds of billions of dollars’ worth of US energy and military equipment and to invest heavily in the American economy.
The agreement is not yet codified in legal text, and both sides appear to have different interpretations of its contents. The investment pledges, in particular, depend on private firms’ commercial decisions and are therefore likely to be difficult to uphold. Regardless, President Trump has made it clear that he will raise tariffs to 35% if the commitments are not met.
The damage from the deal extends beyond the imbalanced trade terms. Committing to large-scale US energy purchases may make sense in light of Europe’s need to diversify away from Russia, but tying a large share of that demand to a single supplier narrows its future options. This is particularly the case given Qatar’s warning that it may divert supplies away from the EU if Brussels implements stricter sustainability rules. Likewise, increasing defence procurement from the US further deepens Europe’s dependence on American systems, undermining its stated goal of building an independent defence industrial base. Meanwhile, higher tariffs on EU industrial exports will weaken sectors that are central to Europe’s green and digital transitions.
The EU failed to use, or even credibly threaten to use, any of the tools it has developed to deter economic coercion. The Anti-Coercion Instrument, designed for precisely this type of situation, was left unused. Nor did Brussels signal its readiness to target other areas where it holds leverage, such as its €200 billion services trade deficit with the US (meaning it imports far more services than it exports), its powerful regulatory reach, or restrictions on access to public procurement markets. In fact, services were not even included in the EU’s list of potential retaliatory measures. By ignoring these levers, the EU lost important opportunities to influence the deal. Instead of holding its own, the EU opted for a strategy that amounts to geoeconomic bandwagoning – accepting unfavourable terms out of fear of escalation.
Compare this with China’s handling of its trade conflict with the United States. Beijing fought a brief tariff war, imposed countermeasures, and later used the removal of those measures as bargaining chips in negotiations. Crucially, it retained leverage by keeping some tariffs in place and by avoiding excessive concessions. The EU, by contrast, entered the talks poorly prepared and left without any bargaining chips in reserve, having made major concessions while securing little more than the avoidance of immediate escalation.
Two main factors help explain this outcome. First, many export-dependent member states, whose industries would have been hardest hit by higher US tariffs, were unwilling to risk even short-term disruption in exchange for a potentially stronger long-term position. This weakened the political will to impose countermeasures. Second, unspoken geopolitical anxieties were clearly at play. Some European leaders likely feared that pushing back economically could prompt Washington to tie its NATO security guarantees more explicitly to concessions on trade.
What makes this particularly troubling is that the imbalance is not purely the result of structural economic facts or an inherent dependence on the US. The EU remains a global economic superpower, with a market comparable in size to that of the United States, a strong regulatory reach, and significant leverage in both goods and services trade. What it lacks is the political will to use this power and to credibly signal geoeconomic deterrence. This reluctance leaves Europe vulnerable to further coercion from allies and adversaries alike and erodes its ability to uphold the rules of international trade it claims to defend.
The Trump-EU trade deal sends a clear signal: economic pressure on the EU works. For those willing to use tariffs, market access, or investment restrictions as tools of power politics, Europe is a pliable target. Defenders of the deal claim that it restores stability to the transatlantic relationship, but this is a false hope. What the EU has enabled is the further deterioration of the global economic environment towards an order structured not by common rules but by the principles of power politics and beggar-thy-neighbour tactics. In such a world, those who stand their ground set the rules, and those who do not are subject to them.
Photo: Jacquelyn Martin / AP / Lehtikuva
The publication has been updated on 26 August 2025: The EU’s services trade was corrected to show a deficit with the US.
