Late-July’s transatlantic US-EU trade deal outlining bilateral tariffs and investment-levels, lauded by Washington, was met with Europe-wide political disapproval, declining markets. The trade deal, which was announced on July 28th, ahead of an August 1st deadline for the introduction of steep tariffs was scheduled to take effect on August 7th, setting tariffs between the world’s two largest economies, while also outlining $750 billion in European purchases of U.S. energy, as well as EU investments of $600 billion in the US economy. Under the deal, EU exports face 15% tariffs while American goods enter Europe tariff-free. For the EU, the US tariff rate for steel and aluminium remains at 50%.

The scope of the US-EU trade deal is substantial, given size of the trade partners, as well as the scope of their respective economies, with the deal effectively covering the world’s largest single-nation economy on one hand, and the world’s largest trade-bloc on the other. Overall, the size of the trade relationship is estimated at €1.6 Tn according to EU sources, with a trade balance of € 200 Bn in the EU’s favor.  

The Political Reactions

Europe’s political landscape has reacted with mixed responses, with several of Europe’s leaders calling the deal unfavorable, including President Macron and Prime Minister Bayroux in France, as well as the Dutch and Hungarian prime ministers, the Danish foreign minister and Swedish trade minister. Adding to this chorus of nay-sayers comes opposition parties from across Europe, including German FDP, SPD, and Greens, as well as both ends of France’s opposition political spectrum, with negative statements from both the right-wing RN and left-wing LFI parties. German MEP Svenja Hahn (FDP) referred to the deal as “damage control”, while German MEP Fabio De Masi (BSW) has called for von der Leyen’s resignation. Europe’s media landscape has also given mixed-reporting, with Politico giving positive coverage to the deal in terms of China-facing geopolitical context, while the Brussels Times and BFM describe the trade deal one-sided.

A One-Sided Deal

Initial media impressions describe the trade deal as a one-way street, with EU exporters losing market access in the US while the EU market provides asymmetric access to US competition. Core European industrial sectors such as steel and aluminium are hit with 50% tariffs. The trade deal also tilts in the US’s favor in key sectors such as consumer goods, food and drink, and agriculture. Additionally, the EU gives up its right to respond to future US pressures through duties on digital services or network fees.

Fundamentally, the EU’s competitiveness predicament is specifically a matter of net investment outflows. In this respect, a trade deal specifically aimed at relocating European capital across the Atlantic, under the pressure, risks prolonged negative market reactions, as well as macroeconomic consequences.

Market Balk at Trade Deal

In addition to the reactions of Europe’s political leaders and media landscape, markets also reacted negatively to the announcement of the trade deal, with both American and European financial markets losing ground, as markets on both sides of the Atlantic experienced sell-offs, in light of the trade-deal’s tariff and investment details, which both reset asset valuations in light of both tariff and investment rules, as well as carrying-forward substantial uncertainties.

Upon the announcement of the trade deal, the US Dow Jones Index dropped by 542 points, comprising a 1.23% loss. This was accompanied by a 2.24% drop in the Nasdaq, as well as a 1.6% drop in the S&P 500. All major European markets followed suit, with several indices seeing their biggest single-day loss since early April. Europe’s benchmark Stoxx 600 index saw a 1.89% fall, while Germany’s DAX-50 index saw a drop of 2.66% and France’s CAC-40 receded by 2.91%. The Euro, meanwhile, slid 1.3% against the US Dollar.

Meanwhile, other key indicators echoed similar sentiments, including the VIX, Wall Street’s fear gauge indicator, which surged 25% hitting hit its highest level in over one month, while gold, a traditional safe-haven asset, saw a 1.85% rally.

This August financial-market reaction comes on the heels of April, 2025 stock market volatilities, a sharply-negative financial market reaction which was also a reaction to the roll-out of Trump’s “Liberation Day” tariffs.

Relief and Uncertainties

In contrast to initial market reactions, EU institution-leaders described the trade deal in optimistic terms, highlighting its certainty.

This emphasis on certainty was echoed by some of the more optimistic leaders among the EU member-nations, with Commission President von der Leyen’s statement outlining that the deal “delivers stability and predictability, for citizens and businesses on both sides of the Atlantic”. This emphasis on certainty and security has been echoed by some EU member-nation leaders, including German Chancellor Friedrich Merz, and Irish Trade Minister Harris.

Indeed, US tariffs on other European and OECD markets, which have recently been declared, also serve as incentive to both bring Europe to the table, and to ensure that the EU keeps faith with any transatlantic agreement. In comparison to tariffs imposed on the EU market, tariffs imposed on Switzerland reached 39% in August, while tariffs imposed on Canada reached 35%.

What these public sighs-of-relief miss, are the uncertainties that remain. It is precisely these, which help produce the sharp and sudden downward pressure on both markets and on Europe’s macroeconomy. For starters, the EU’s $600 Billion US investment outlined in the deal is both aspirational and neither under either party’s official jurisdiction, nor does the deal include any enforcement mechanism for transatlantic investments, relying instead on private-sector investment, over which, the EU has no direct authority. After the trade deal’s announcement, European Commission officials clarified that investment funds would come exclusively from EU private-sector companies, with public investment not making any direct contribution.

Next, the deal’s mention of non-tariff barriers, which deal with quotas, export-restrictions, and trade-related use of regulatory-specification, are also aspirational, with the agreement’s language signalling intent to address non-tariff barriers for industrial exports, non-tariff barriers for agricultural exports, and barriers for digital trade.

Third, the trade deal’s 15% tariff is comparable to the blanket world 15-20% worldwide flat tariff rate, which the US outlined for all countries which did not have a bilateral trade agreement by the start of August, with the idea to pressure trading partners into bilateral trade deals. The underlying implication is that the tariff rate that the EU has negotiated, is not only higher than that of the 10% outlined in the US-UK trade deal, but also might not represent a substantive improvement in trade-terms vis-à-vis the proposed worldwide flat tariff rate.

In other words, the signal that markets have communicated since the US-EU trade deal was announced, is one of concern and uncertainty responding perhaps more to unresolved questions about non-tariff barriers, private-sector bilateral investment, and the worldwide general tariff rates, than to sentiments expressed by EU leaders. Particularly on the side of European markets.