EU–US Trade Pact: Failure or Success? VDS Reactions In Focus
- Venice Diplomatic Society
- Aug 6
- 9 min read
The recent US-EU trade deal could not but spark a wave of discussions regarding its terms and the future prospects for both parties involved. This topic has not escaped the attention of the VDS analytical circle, prompting our authors to share their insights on the matter.
It is an often-repeated claim that the EU is a bloc that serves the interests of the USA, and the new Trade Deal between the two only works to cede ground to such a claim. On Sunday, July 27, 2025, US President Donald J. Trump announced that his administration had reached an agreement with the EU to reform the terms of trade, a restructuring that sees numerous changes and investments that benefit the US.
The most salient element of the deal is the introduction of a 15% tariff rate on all European goods imported into the US, with an exception for steel, copper, and aluminium, which are tariffed at 50%. In and of itself, this measure only hurts EU trade opportunities, as European exporters will face higher costs to enter the American market, but the deal also oversees other important terms: $600 billion in investments into the US, $750 billion in purchases of US energy exports, and significant purchases of US military equipment.
...it only serves to legitimize his style of politicking and to ensure the European Union never becomes fully capable of independently addressing its security challenges...
Acquiescing to such demands goes opposite to the stance against Donald Trump that we had seen at the start of his second term; rather, it only serves to legitimize his style of politicking and to ensure the European Union never becomes fully capable of independently addressing its security challenges, let alone becoming a Federal State. The deal’s condition on energy purchases is especially alarming, as the EU seems unwilling to learn from its previous mistake of heavily relying on a third country to meet its own demand.
The only thin lining I envision is one in which the deal is only a temporary means to appease the US while the Union works in settling deals elsewhere to move towards a more independent and secure future.
I personally think that, amidst the whole confusion of such negotiations (as the article quotes, there are certain areas which are still under discussion), this is just a sign of the overall shift in geopolitical alignments, with the European Union subjugated by the US. Although I think this is not a good plan to follow, I can't imagine things going differently for us.
The US-EU trade deal has generated a big debate with polarizing opinions. On one side, the European Commission Chief, Ursula von der Leyen, and her followers, among others, German Chancellor Friedrich Merz, celebrated it as a huge deal, able to bring stability. On the other side, certain EU politicians, like Hungarian Prime Minister Viktor Orban and French Prime Minister Francois Bayrou, claimed it a failure. My personal stance aligns more closely with the latter group. Although I do not see all the terms of this agreement as particularly negative, 15% is a feasible tariff given that “the US bully” absolutely wanted to set some level of tariffs. Nonetheless, Trump declared that the Europeans promised to buy $750bn in US energy goods, an amount that well exceeds the normal external consumption of the EU. If this is true, making unrealistic promises does not suggest a great start to me.
Leaving aside the content of the agreement, what really induces me to look at this trade deal as a failure rather than an achievement is the comparison with the UK case. The country has managed to reach way lower tariffs (around 10% on most UK goods), and given the EU’s stronger bargaining power in comparison to insular Britain, why was the largest trading partner of the US unable to obtain a similar result? The answer to this question connects to my second point of criticism.
The terms of this agreement were not inevitable; we chose this stance.
As analyzed by the Vice-President of ISPI, Professor Altomonte, it was the fragmentation of the EU, nothing new to our ears, that impeded a stronger response, as the 27 countries were not unified. I believe that showing this weakness so plainly in front of Trump from the outset could deeply harm us in the future. The terms of this agreement were not inevitable; we chose this stance. Unfortunately, nothing lets me believe that the nature of our relations will change, so my predictions for future negotiations remain pessimistic.
I think the EU was already on the back foot with the US considering the issue of over-reliance in a lot of fields. Also, commercially speaking, US-based companies were facing (rightful) limits on the European markets while a lot of EU-based companies were enjoying great freedoms in the US and have far more investments solely focused on the American market (especially in transportation and luxury goods). These concessions are extra harmful to EU companies and might come as a bigger shock than expected.
There was never a time the EU had enough leverage against the US on the negotiation table, but this is certainly a new low, as this kind of hostility was never expected from such a long-standing ally for many in the EU.
The deal was signed, for now. On 27 July 2025, the President of the European Commission, President Ursula von der Leyen, and the President of the US, Donald J. Trump, decided on the final content of the trade, or, better said, tariffs, deal.
The deal opened a bifurcation of feelings for the EU. In particular, on the one hand, even if reassured by the EU institutions, Western markets were characterized by a general dissatisfaction with the tariff ceiling of 15% established by the US, though better than the 30% alternative. On the other hand, considering the EU tech sector and businesses, the deal might constitute an opportunity to redirect the economic and commercial relationships of the European tech businesses to different markets.
Leaving the general tariffs aside and focusing on the EU tech sector and businesses, one of the points contained in the deal specified that a 15% ceiling would also apply to future tariffs concerning EU semiconductors exported to the US. Such tariffs are not yet envisaged in the deal; however, the US made a clear allusion to potential tariffs on EU semiconductors, metals, and natural resources such as aluminium and steel, materials which constitute key components for both EU software and hardware.
Conversely, it is interesting to notice that the Trump administration is carefully looking at the developments of EU tech businesses. The US paid particular attention to the EU-US partnership on key metals such as aluminium and copper to prevent potential aggressive economic policies by other countries disposing of or manufacturing products composed of these metals, in particular those of the Chinese government. Therefore, to prevent a shift of EU markets toward the Chinese “overproduction” of these metals, the US expressed interest in keeping the partnership on specific tech-related components concerning the EU tech sector. Even if the EU Commission, before the day of the meeting between Ursula von der Leyen and Trump, affirmed in one of the Q&A published on the EU Commission website that the EU and the US managed to reduce the previous 50% tariffs on these key metals, the question remains the same. Is it convenient for the EU tech businesses to continue investing in the EU-US relationship in light of possible future tariffs, or is it better to find new markets to continue producing at a cheaper cost?
For the moment, the 15% tariffs might be interpreted, though in a purely speculative way, as a sort of additional veil to cover further negotiations primarily affecting specific EU sectors and businesses, such as the tech ones. The EU tech sector would be seriously damaged if the current US administration imposes the 15% tariffs on semiconductors and if the 50% tariff on strategic metals (e.g. steel and aluminium) exported to the US, two consequences the EU Commission made clear not to wish for. However, as for the negotiation positions of the US, the past US presidency behavior suggests that the current tariffs on steel and aluminium, particularly, might soon be imposed. Theoretically, no 15% tariff on semiconductors can be applicable. The reasoning behind this claim lies in the content of Section 232 of the US Trade Expansion Act of 1962. Under this section, no tariff imposed would apply to producers of semiconductors in the EU, unless decided by the US in the name of its national security. Consequently, unless the US decides to establish specific new tariffs on semiconductors or strategic metals under Section 232, the EU business should be safeguarded by the MFN (Most Favoured Nation) tariff. This ensures that only a standard tariff, which is lower than the current 15% tariffs, will be levied on semiconductors and strategic metals imported from the EU.
As both EU and private R&D concerning AI and supercomputers continue, safeguarding the EU’s strategic metals supply and protecting EU tech businesses, in particular the EU semiconductor producers (i.e. France’s STMicroelectronics or Germany’s Infineon) have been acknowledged as key EU priorities. In the long term, possible tariffs may lead to a more limited production capability for European AI models and supercomputers, which rely on these semiconductors and rare metals, thus stunting several EU tech-related initiatives and programs.
If the growth of the EU tech sector were to halt due to higher costs and lower exports, EU companies might lose momentum in the production of semiconductors and in the production of multi-purpose chips. Ultimately, the EU might find itself too far behind in the “Global AI race.” These tariffs would primarily affect EU tech businesses, which, when compared to their US counterparts, are already at a disadvantage, for instance, in the creation and development of competitive AI models and quantum or supercomputers, technological advances which have been prioritized since the beginning of the Trump administration.
The imposition of such tariffs diminishes the real possibilities of developing an internal EU production of European chips, EU AI models, and common European data spaces and facilities. These objectives were previously outlined, together with several other acts and initiatives, in the European Chips Act, in the AI Innovation Package, and in the AI Continent Action Plan. Consequently, it is logical to hypothesize that maintaining a 15% tariff rate, similar to other EU products, or increasing it, would likely delay the roadmap for establishing AI Gigafactories, which are expected to be operational by the end of 2026. For example, try to picture the AI Gigaactory building already finished yet with no hardware inside, as the construction of the servers was delayed. Notwithstanding the efforts and commitments proposed in the InvestAI initiative to create a common European AI ecosystem, imposing these tariffs, especially on semiconductors, could undermine the InvestAI Facility fund (€20 billion). This fund, identified by the Commission for the creation of five AI Gigafactories and characterized by public-private partnerships, may also be undermined, as the public sector of EU member states might be required to increase their contributions to bridge the gaps created by the tariffs.
...a third way might be considered. The EU could view its negotiation position as a strategic opportunity rather than a loss.
The EU tech sector finds itself under the double-edged sword proposed to the EU Commission: either accept the joint agreement and find a better deal reducing the current tariffs, or find other markets and keep suffering the current tariffs on semiconductors and rare metals. However, a third way might be considered. The EU could view its negotiation position as a strategic opportunity rather than a loss. The EU may find it easier to begin exporting to other foreign countries instead of negotiating for a more favorable agreement with the US. By exporting to other countries such as Türkiye, India, or Norway. Needless to say, increasing exports to these countries offers a modest opportunity in terms of export earnings compared to the past exports to the US.
In conclusion, regardless of the decision the EU institutions might take shortly, the EU must rapidly decide on the future of its tech sector while finding new, more reliable allies to remain competitive in the global AI race. For now, the EU is still one of the leaders, especially in the regulation of AI, and it might become one of the most important AI actors in the future, especially for its cutting-edge semiconductors. However, at present, negotiations appear to be the main challenge.
This is just a first look at the proceedings — a topic that certainly deserves deeper research and debate. And what do you think about the EU–US trade deal? Share your insights in the comments below.
For further information on the agreement, feel free to consult the following links:
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