The end of free trade: The US is on the verge of harsh action against the EU
Despite the August 1 deadline approaching, the United States and the European Union are far from concluding a trade agreement. If this does not happen, then the parties included in the top 3 largest economies in the world may impose mutual duties of 30%, which will have a serious effect on the whole world. The hardest hit, however, will be Europe, which has just begun to recover from almost three years of crisis. The European Commission, however, is counting on a discount similar to the one Japan recently received. Why Washington and Brussels have not yet been able to agree on the issue of tariffs and how the failure of negotiations threatens the participants is in the Izvestia article.
One problem — 27 responses
When the US tariff war with most of the rest of the world was just beginning, it seemed that the EU would be able to sit on the sidelines — after all, America's main efforts were directed at China and its closest neighbors and colleagues in NAFTA. But six months have passed, and the European Union has not reached any agreements. In the spring, the United States planned to set a total tariff of 50% for Europe, one of the highest in the world. In June, US President Donald Trump lowered the requirements and wrote a letter to the Europeans setting the value at 30% in case no agreement could be reached before the deadline. For comparison, an agreement was promptly signed with the UK back in May, setting duties at 10%.
The previous version of the agreements, which was defended by Brussels, assumed the complete abolition of duties on industrial goods, increased access of American agricultural products to the American market (a rather painful topic for the United States, given the rigidity of European regulation of the food market), as well as the joint construction of data centers. The United States rejected this idea. After that, the Europeans expected that, as in the case of Britain, Washington would limit itself to a minimum duty of 10%, but these expectations were crossed out by Trump's letter. Currently, 30% looks like the basic scenario for the development of events.
It should be noted that some duties on European goods are already in effect within the framework of the general tariff policy of the United States. Thus, 25% duties have been introduced on cars and auto parts, and 50% on steel and aluminum. In addition, the Americans are threatening new duties on pharmaceuticals and semiconductors.
Bourbon is under threat
The difficulties in reaching an agreement between the EU and the United States can hardly surprise anyone. Despite all the difficult relations with China, Washington has interacted with a single government that understands what it wants. The same applies to the UK, Vietnam and other countries with which trade documents have already been signed. In the case of Europe (and Treasury Secretary Scott Bessant spoke about this directly), Washington is dealing with 27 countries, each with its own interests. The Brussels European bureaucracy cannot resolve this issue on its own, without the participation of the member states. On the much smaller issue of signing a trade agreement with South American MERCOSUR, there was a real storm of indignation.
Many European countries, like Italy or Hungary, are friendly towards the current administration in Washington. But their attempts to mediate have so far had no effect. As for signing separate agreements with EU countries, this is impossible, because it will derail the entire pan-European economic policy. So you need to negotiate with everyone one way or another, and there's no way without consensus.
At the moment, the impasse in the agreement has led to the fact that the EU is preparing to impose counter 30 percent duties on American goods totaling €100 billion per year from August 1. As part of the first wave of retaliatory measures, the EU will combine the already approved list of duties on American goods worth €21 billion with the previously proposed list for an additional €72 billion. Among the goods that may be subject to duties are industrial products, including Boeing airplanes, American—made cars and bourbon. The retaliatory measures from Brussels will affect about a third of American exports to the EU (last year, the United States supplied €335 billion worth of goods to the European Union). The duties may take effect as early as next month, but only if no deal is reached and the United States implements its threats after the August deadline, the sources said, who wished to remain anonymous.
These plans appeared against the background of the tightening positions of the EU countries, including Germany. The Germans say that Berlin is even ready to support the use of the so-called instrument against coercion (ACI) in the event of a breakdown in negotiations. Interestingly, this tool was invented in 2023 to counter Russia or China. It gives the European Council and the European Commission broad powers to impose protective measures, including new taxes and investment restrictions. For example, additional taxation may be imposed on American IT giants.
On the path of Japan
Nevertheless, there is still hope in Europe that an agreement will be reached. Most EU countries agree to a tariff of 15% — in this case, most likely, no retaliatory measures will be taken. Currently, under the most-favored-nation regime, the average duty on shipments of goods from the EU to the United States is 4.8%, meaning a net increase of about 10 percentage points. For Brussels, this is a relatively acceptable option, although it is likely to cut off about 0.3 percentage points from EU GDP growth, according to analysts.
However, given the near-zero growth rates of the European economy in recent years, the effect may be quite noticeable in numbers. It is noteworthy that now absolutely no one is talking about zero or even minimum (10%) duties — this is already "over." These are the realities of global trade established in 2025, which were unthinkable a year or a year and a half ago.
15% is exactly the rate that the United States agreed on with Japan. The negotiations were also quite difficult, and there were a lot of threats from both sides. A key factor in the agreement was Japan's promise to invest about $550 billion in the American economy. However, the details of these investments are not yet fully clear. The amount is extremely serious, amounting to about 15% of the size of the Japanese economy. At the same time, the total amount of savings in Japan is several times higher than the national GDP, so the Japanese have money. At the same time, the Land of the Rising Sun promised to increase purchases of many American goods, including rice, which looks rather ironic.
In general, so far it turns out that it is with the Asia-Pacific countries that the United States concludes the most successful trade agreements. At the same time, these countries are ready to make big concessions to the Americans. This is to be expected to some extent: they all have significant trade surpluses with America and depend on the American market more than the United States depends on their markets. In the case of the EU and, say, Canada, the situation is much more complicated. The surplus here is not so great, so both sides have something to lose in each case.
Nevertheless, Trump's bet has so far been justified. He has raised tariffs since the spring, but so far this has had no effect on inflation and US GDP growth. Suppliers prefer to reduce margins in order not to lose the American market. The main goal of aggressive tariff policy is not so much protectionism as an attempt to quickly fill the budget, which is bursting at the seams in the United States.
Moreover, it is necessary to somehow compensate for the losses from the "Big Beautiful Bill", which over the next 10 years will increase US debts by more than $ 4 trillion. The duties, which can bring in more than $300 billion, can significantly slow down the budget gap. The most important thing is that it will be incredibly difficult for Trump's successor, whoever he may be, to lift tariffs for this reason. They are with us, most likely, for a very long time.
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