{"id":16070,"date":"2025-07-28T12:05:48","date_gmt":"2025-07-28T12:05:48","guid":{"rendered":"https:\/\/topat10.com\/?p=16070"},"modified":"2025-07-28T12:05:48","modified_gmt":"2025-07-28T12:05:48","slug":"europe-surrenders-to-trump-and-thus-secures-victory-by-the-back-door","status":"publish","type":"post","link":"https:\/\/topat10.com\/?p=16070","title":{"rendered":"Europe surrenders to Trump (and thus secures victory by the back door)"},"content":{"rendered":"\n

Stocks are up this morning on the certainty of a new trade deal<\/a> between the U.S. and the EU. American businesses and consumers will now face a 15% tariff on all imports from Europe, while President Trump confirmed the EU tariff level has been reduced to zero. Previously, the tariff level on both sides was just under 3%.<\/p>\n

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President Trump, visiting his golf courses in Scotland, is positioning the deal as a win. The agreement includes a large amount of direct investment into the U.S. by Europe, including: $750 billion of energy purchases, $600 billion in extra direct investment, and the purchase of \u201ca vast amount of military equipment,\u201d the president said.<\/p>\n

S&P 500 futures moved up 0.27% this morning but the STOXX Europe 600 rose by more than double that in early trading.<\/p>\n

Why are investors in Europe so happy about Trump\u2019s great victory over them? The devil is in the details, and the pact seems to contain several advantages for the EU.\u00a0<\/p>\n

The auto tariffs, for instance, now benefit European manufacturers over North American competitors. The 15% level is lower than that faced by Canada and Mexico, which are much nearer the U.S. auto market. \u201cHow can the administration square a 15% tariff on cars from Europe and Japan, while manufacturers in the U.S., Canada and Mexico are laboring under 25% tariffs?\u201d Patrick Anderson, CEO of the Anderson Economic Group, told The New York Times<\/a>.<\/p>\n

The deal does not require the EU to alter its digital services tax on large tech companies.<\/p>\n

There is also no current change in drug pricing rules. The pharma industry is one of Europe\u2019s biggest, and Trump has long complained that Europeans get drugs cheap because companies inflate pricing in the U.S.<\/p>\n

Meanwhile the \u201cnew\u201d direct investment and military purchases may likely have happened anyway\u2014Europe is fighting a war against Russia on its Eastern flank, after all.\u00a0\u00a0<\/p>\n

\u201cEurope is already the largest foreign investor in the U.S., with European direct investment increasing by roughly $200 billion from 2023 to 2024. Three times that over an undefined period is hardly a great coup,\u201d The Wall Street Journal\u2019s editorial board noted<\/a>.<\/p>\n

Simon Nixon, who writes the Wealth of Nations Substack, said<\/a>: \u201cThe real win from the EU\u2019s perspective is that it has successfully fended off Trump\u2019s demands that it rewrite its regulatory rulebook to benefit U.S. companies. In particular, Trump had been demanding changes to EU digital services rules, agricultural rules and pharmaceutical pricing.<\/p>\n

\u201cThe irony is that this is the one thing that U.S. companies would have most wanted out of any trade deal. Instead, they have been hit with a massive hike in tariffs on imports \u2026 without any increase in EU market access.\u201d<\/p>\n

In Europe, analysts seem to be concluding that deal is mostly Scotch mist. The tariff level itself is much lower than what Trump previously threatened, and the accompanying investment will get lost in the mail.<\/p>\n

\u201cThe EU and the U.S. agreed that U.S. consumers should pay more tax\u2014levied at 15% for imports from the EU. EU President von der Leyen made vague pledges to buy stuff from and invest in the U.S., without the necessary authority to make those pledges reality. Pharmaceuticals and steel seem to be excluded from this deal. The result is better for the U.S. economy than the worst-case scenario, but worse for the U.S. economy than the situation in January this year,\u201d UBS\u2019s Paul Donovan told clients this morning.<\/p>\n

Here\u2019s a snapshot of the action prior to the opening bell in New York:<\/strong><\/p>\n