Experts in economics critically examine the trade arrangement between the European Union and the United States - Experts in economic fields voice disapproval over the EU-US trade accord
The EU and the US announced a long-awaited trade agreement on Sunday, following months of tough negotiations. The deal, while averting a potentially severe trade war and stabilizing tariffs, is likely to produce mixed long-term economic consequences, according to experts like Julian Hinz and Ulrike Malmendier.
The agreement sets a 15% baseline tariff on most EU goods exported to the US, a concession that, while less destructive than a trade war, still raises costs and limits the benefits of free trade. Selective “zero-for-zero” tariff exemptions exist for strategic sectors like aerospace, specialty chemicals, generic drugs, and semiconductor equipment, protecting some high-value European exports. However, commodity chemicals and plastics remain subject to tariffs.
The deal provides predictability and market access, allowing businesses on both sides to plan long-term investments with a clear cost structure rather than facing uncertainty due to escalating tariff threats. However, the elevated tariffs contribute to a modest drag on economic growth and may slightly raise inflation by increasing prices of imports and raw materials used in manufacturing.
Ulrike Malmendier, another economist, expresses relief at the trade agreement but finds the 15% tariffs hard to understand in the 21st century. She warns that the tariffs could lead to a significant burden on the economy, especially for individual companies. Malmendier's comments were made on Monday in the ARD-"Morgenmagazin."
Veronika Grimm, an economist at IfW, criticizes the EU's policy for not being honest with the population and covering up structural problems with massive debt. She emphasizes that the EU must now "finally wake up and take care of its own growth agenda" to avoid losing ground.
The deal also reflects a compromise that preserves transatlantic ties important beyond economics, including security and climate cooperation. However, some analysts warn it risks undermining a rules-based global trade system. The EU is leaving behind the principles of the multilateral and rule-based global trade system of the World Trade Organization (WTO).
According to Trump's statements, the EU also agreed to additional investments in the USA worth $600 billion (€510 billion) and energy purchases worth $750 billion. The current EU-US trade agreement creates a dangerous precedent by violating WTO principles, as Grimm states that the EU is going into debt and buying weapons and energy from the USA, leaving only debts in return.
While the deal avoids catastrophic scenarios and maintains some sectoral protections, experts like Hinz and Malmendier caution that the long-term economic outlook includes constrained trade liberalization, higher costs for industries exposed to tariffs, and potential negative implications for international trade norms. Thus, its benefits must be balanced against these enduring challenges to economic efficiency and growth.
In conclusion, the EU-US trade agreement offers temporary relief and stability but also poses longer-term challenges such as elevated tariffs impeding true free trade, increased costs for businesses, and risks to global trade rules. The EU must carefully consider these implications as it moves forward with this agreement.
[1] Source: The Wall Street Journal [2] Source: Reuters [3] Source: The Economist [4] Source: Financial Times [5] Source: Bloomberg
The agreement's 15% baseline tariff on most EU goods exported to the US, while averting a trade war, may pose long-term challenges for businesses in the finance sector, as it raises costs and could potentially limit profits. The deal's impact on general news extends beyond economics, as some analysts warn it could undermine a rules-based global trade system, with the EU potentially violating World Trade Organization (WTO) principles by going into debt and making large investments in the US.
