Who Wins in the US-EU Trade Deal? 

Peter Chase, a former US diplomat and Vice President for Europe of the US Chamber of Commerce, spoke with CEPA Senior Researcher Anda Bologa to analyze the deal. The interview is edited for clarity.

What is your overall evaluation?

My starting point is that this is not a win‑lose situation. It’s lose‑lose. Many will portray (President Donald) Trump as the winner and the Europeans as the losers because European goods now face many tariffs going into the US.  The problem for Trump, though, is what he’s doing directly undermines the US economy and US consumers.

How so?

What most people don’t see is that the US and Europe have a relationship based on investment, not on trade. When you talk about Trump’s tariffs, those affect only the movement of goods between Europe and the US across the ocean on ships. That’s a very small part of the US‑EU economic relationship. There is $3.9 trillion of US company investment in Europe, $2.6 trillion of which is in the EU, and then there’s $2.4 trillion of European company investment in the US. Those European investments are in often in manufacturing factories, and they employ literally millions of workers.

These investments drive a lot of the trade across the Atlantic. Indeed, over half of the US-EU goods trade is intra‑corporate, within the same company. If you raise tariffs on that trade, all you’ve done is make the factory in the US that employs all these American workers pay more for their inputs, which they have to get from Germany, or from Hungary, or from wherever Siemens or BMW has other component‑producing plants. US companies that have operations in Europe are similarly affected. This makes those companies less competitive, and indeed could have worse effects.

When — and where — will price spikes or shutdowns face the sharpest blow?

If the cost is too high or if the uncertainty of the tariff rate is too high, this disrupts trade flows. Then, if you’re missing one component in a factory in the United States, if you don’t get it, then the production has to close down. You can’t produce complex things without each of the individual components that you need for that specific product. And unfortunately, not every one of those components is made in the US. While the President may want them to be, under the best of circumstances it will take time before they are. And in the meantime, Americans will be hurt most. European factories will also suffer to an extent, but it’s going to be the American factories that have to close down that will cause the problem for Trump.

Which European and American sectors are most likely to add or lose jobs over the next 12 months?

It’s difficult to say. About half of foreign investment in the United States is in manufacturing; for the Europeans, a large part of that is in chemicals and transport equipment, so these will likely be hurt the most. But we also need to put this in perspective: Manufacturing is something on the order of 10 % of GDP in the United States. If manufacturing gets hurt, the economy will continue to perform, but I worry about the poor factory workers who may unnecessarily find themselves out of work.

Is this the final word?

No. Anyone who thinks reaching a deal with the Trump administration will at least buy stability and certainty is in for a surprise. This agreement will be significantly changed before the end of October as the US is certain to at least threaten and very likely impose another increase in one or more tariff rates for one reason or another.

Britain obtained a 10% tariff, lower than Europe: is that significant?

Generally speaking, the difference between a 10% tariff and a 15% tariff is not big enough to make a company in the US change their foreign suppliers, so I would not expect US companies to shift from a European to UK producer.

Will multinationals ride out the new barriers more easily than small and medium‑sized enterprises?

Big companies always do better because they have people around the world and can more easily shift supply relationships. A small company has no alternative.

There may be a few parts of the US-EU trade deal that will help SMEs. The US Commerce Secretary Howard Lutnick has talked about how the Europeans will “recognize American standards.” If the Europeans finally recognize that American standards are equivalent, then that makes it much easier for a small American producer to sell in Europe.

Should Europe have retaliated rather than agreed?

Retaliation would be self‑inflicted harm. The better thing to do would actually be to stay focused on strengthening the rule of law governing trade — work with other countries so that all of the other countries say to Mr. Trump, “What you’re doing is illegal,” and we will respond collectively against it.

Europe just pledged $750 billion to by US gas. Will that kill its climate change ambitions?

No. The quickest way to reduce greenhouse gas emissions is to substitute natural gas for coal. Europe is generating huge amounts of renewable energy, but it’s nowhere near sufficient for its own economy. They will need to import and still use fossil fuels for a number of years still. Getting those fossil fuels from the US, which is now the biggest producer and exporter of hydrocarbons, makes lots of sense.

The natural gas pledge was a headline for Trump that is economically meaningless. Europeans would do that anyway.

How is Beijing likely to respond?

China loves all this because the US is doing a very, very good job of burning up whatever goodwill it has built up over time — all to Beijing’s benefit. Washington should be building a coalition of countries to confront China on the damage its excess capacity causes for the global economy. Instead, the United States is fighting with the rest of the world.

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.

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