Filenews 31 July 2025
By Bloomberg's editorial team
The White House trumpets the new trade deal with the European Union, following a similar deal with Japan, as a major victory. Both agreements impose 15 percent tariffs on most exports to the U.S., along with other concessions, on the face of it, removing the threat of an endless trade war and confirming U.S. sovereignty. Financial markets rose on the news.
In fact, there is no reason to celebrate. Both agreements are "lose-lose" for everyone involved. The best one can hope for is that the government will now move on to other priorities before more damage is done.
In narrow economic terms, the claim that the U.S. won both negotiations is simply false. Tariffs are taxes. Soon, American consumers will pay most, if not all, of the cost increase. And the problem is not only that imports will be more expensive. U.S. producers of competing products will face less pressure to compete and innovate, and they will also raise their prices. In due course, these forces will squeeze the standard of living of the United States. Always remember that the biggest loser from tariffs is always the country that imposes them.
These costs can be manageable in the long term, as long as the agreements put an end to recent trade disputes. European Commission President Ursula von der Leyen, who struck the deal with the U.S. over the weekend, underlined just that to justify the bloc's surrender to U.S. demands — praising the deal for restoring stability and predictability for both consumers and producers.
I wish. Firstly, both agreements, like the one concluded earlier with the United Kingdom, are preferable to be regarded as 'framework agreements' rather than definitive agreements. For example, what does Japan's commitment to finance a U.S. investment fund run by the White House actually entail? It's hard to say. (It has been presented as a $550 billion "signing bonus." Japanese officials probably don't see it that way.)
Under the US-EU agreement, some European products will have duty-free access to the US. What are they? Nobody knows. In both cases, many important details have not yet been finalized. Meanwhile, citizens in Japan and Europe have seen their governments humiliated, which probably reinforces opposition to their policies and uncertainty.
If or when these specific agreements are concluded, there will be new ones that will have to be reached – and the issues at stake are not limited to trade policy. If in the future the White House aims to settle all these differences by reviving the threat of punitive tariffs or by implicitly threatening to withhold security cooperation, von der Leyen's vision of stability and predictability will be confirmed as an illusion.
More dangerously, the government's supposed triumphs may now confirm its belief that the U.S. is strong enough to demand submission, as opposed to genuine cooperation, from countries it once considered friends. If so, increased instability – fatal to long-term planning, investment and global cooperation in all sectors – will not be just a passing phase.
Power through disruption is a self-destructive strategy. Sooner or later, this will become painfully obvious.
Rendering – Editing: Lydia Roubopoulou
