How the US-EU trade deal could affect the EU and what’s positive for Ukraine

On 27 July, just days before Donald Trump’s deadline for imposing unilateral “reciprocal” tariffs, the EU and the US reached a trade agreement.

And this is one of the few trade deals Donald Trump has concluded so far.

These agreements are of an entirely new kind – completely asymmetric, where one partner agrees to significantly open its own market to imports from the US while simultaneously accepting a substantial deterioration in its access to the American market.

Read more about this agreement and why it could have positive consequences for Ukraine in the article by Veronika Movchan of the Institute for Economic Research and Policy Consulting: EU concessions in favour of Ukraine: what will be the impact of the EU-US trade agreement.

For the EU, the worsened access to the US market is expected to lead to losses between 0.2% and 0.8% of GDP. However, the new US trade policy will also have painful consequences for the United States itself.

According to estimates by the Kiel Institute for the World Economy, the sharp rise in import tariffs for all trade partners (not just the EU!) could cause real output in the US to fall by 1.7% of GDP.

Although, evidently, the EU’s opening to US industrial goods, along with increased energy exports and investments into the US economy, will partially offset these losses.

The prevailing assessment is that the deal allowed the EU to avoid a worse outcome.

In April, the proposed “reciprocal” tariff for the EU was set at 20%; in May, Donald Trump threatened to raise it to 50%; and at the beginning of July – to 30%. Eventually, the parties agreed on 15%.

The trade deal between the US and the EU has not yet been signed. The political agreement reached on 27 July forms the framework for a future deal, but aside from immediate obligations, these understandings are not legally binding.

The parties agreed to continue negotiations in accordance with their internal procedures until the political agreements are fully implemented.

And this situation is not unique. According to Global Trade Alert, as of 31 July, the US had announced nine trade deals concluded under the new trade policy. However, none of them have been published, and based on available information, the final texts of the agreements have not been finalised in any case.

There remain many open questions in the US-EU agreement.

One element of the agreement is the EU’s commitment to purchase $750 billion worth of US energy resources by the end of 2028, which equals about $250 billion annually.

The increasing role of the US means a real chance to finally complete the EU’s replacement of Russian energy supplies, thereby eliminating yet another lever of Russian influence.

And that is an undeniable plus for Ukraine.

The key here is for the US to fulfill its commitments, as this would require a sharp increase in exports or a significant reorientation.

Another important element of the US-EU agreement is the EU’s commitment to make an additional $600 billion in investments in the US over the next three years.

It would benefit Ukraine if these investments were primarily directed into the military-industrial sector. Moreover, the general reduction in tensions in trade relations between the US and the EU allows both parties to focus more on security issues, which is a core interest for Ukraine.

While the geopolitical significance of the US-EU deal for Ukraine is substantial, its economic impact on Kyiv may prove to be limited.

Ukraine may face increased competition in the European market due to its opening to American goods, but this would apply to a relatively narrow range of products.