Europe surrenders to Trump (and therefore secures victory by the back door)
Stocks are steadily rising this morning New trade agreement Between the US and the EU. American businesses and consumers now face 15% tariffs on all imports from Europe, but President Trump has confirmed that EU tariff levels have fallen to zero. Previously, tariff levels on both sides were below 3%.
President Trump, who visited a golf course in Scotland, positioned the deal as a victory. The deal includes a large amount of direct investment by Europe in the US. This includes purchasing $700 billion in energy, $600 billion in direct investment, and purchasing “a huge amount of military equipment.”
The S&P 500 futures rose 0.27% this morning, while the Stoxx Europe 600 more than doubled in early trading.
Why are European investors so happy with Trump’s big victory over them? The devil is in detail, and the agreement appears to contain several advantages for the EU.
For example, automotive prices are currently benefiting more European manufacturers than their North American competitors. The 15% level is lower than the level facing Canada and Mexico, much closer to the US auto market. “How do US, Canada and Mexico manufacturers fall below the 25% tariffs on cars from Europe and Japan?” Patrick Anderson, CEO of Anderson Economic Group. He told the New York Times.
The transaction does not require the EU to change its digital services tax on major high-tech companies.
Additionally, there are no current changes to drug pricing rules. The pharma industry is one of Europe’s biggest, and Trump has complained that Europeans would get cheap drugs as businesses are inflated prices in the US.
Meanwhile, “new” direct investments and military purchases could have happened anyway. Europe, after all, is fighting a war with Russia on its eastern flank.
“Europe is already the largest foreign investor in the US, with European direct investment increasing by about $220 billion between 2023 and 2024. Three times more than a major coup over an undefined period.” The Wall Street Journal editorial board pointed out.
Simon Nixon, who writes the National Materials of Wealth; I said: “The real victory from the EU perspective was successfully making Trump’s request to rewrite regulatory rules to benefit American businesses. In particular, Trump had requested changes to EU digital services regulations, agricultural regulations and drug pricing.
“Ironically, this is one of the things US companies wanted most of a trade contract. Instead, they are suffering from a massive increase in tariffs on imports without increasing access to the EU market.”
In Europe, analysts seem to conclude that most transactions are Scotch Mist. The tariff levels themselves are much lower than what Trump had previously threatened, and the investment that comes with them is lost in the mail.
“The EU and the US have agreed that US consumers should pay more taxes. Regarding imports from the EU, EU President von Der Leyen has created ambiguous pledges to buy and invest things from the US without the necessary authority to make those pledges a reality. UBS’s Paul Donovan told a client this morning.
Here is a snapshot of the action before the New York Opening Bell:
- S&P 500 Futures The index rose 0.4% this morning after hitting a new all-time high of 6,388.64.
- Stoxx Europe 600 Early trading saw an increase of 0.67%.
- UK FTSE100 Early trading increased by 0.14%.
- Nikkei 225 in Japan It has decreased by 1.10%.
- China CSI 300 Index An increase of 0.21%.
- Korean Cosplay An increase of 0.42%.
- Indian Nifty 50 A decrease of 0.6%.
- Bitcoin It was flat at just under $119K.