Deal Or Collapse: The EU-US Deal Is affirmative & The Only Realistic Alternative

Authored bv Daniel Lacalle,

The agreements the United States has signed with its main trading partners are both positive and realistic.

They demonstrate that, in 2024, the world was not a trade paradise of spontaneous cooperation among free-market companies as per David Ricardo’s ideal, but rather a statist system filled with barriers against US businesses and political efforts to pick winners and losers.

The controversy surrounding the agreement between the United States and the European Union can only be explained for three reasons: animosity toward any achievements of the Trump administration, ignorance about the only realistic alternative, or because critics of the deal were genuinely satisfied with the protectionism and European barriers in place in 2024.

Critics of the deal must answer two questions:

What was the only real alternative?

The only real alternative was a collapse in European exports, a loss of competitiveness versus Japan, the United Kingdom, South Korea, and other partners, greater offshoring of companies, and, crucially, keeping existing European trade barriers.

What would the critics have done?

Critics must explain how they would have achieved supposedly better deals when global export leaders have signed agreements like that of the European Union. They need to share with us what essential information they have that the EU negotiators do not, reportedly enabling them to achieve better conditions than Japan, the United Kingdom, South Korea, Indonesia, Vietnam, the Philippines, Saudi Arabia, Qatar, Australia, China, and others. Is it reasonable to think that EU negotiators were stupid or reckless and did not weigh all options to achieve a beneficial agreement?

Claiming that the agreement with the United States is detrimental is, inadvertently, to defend the trade barriers with Europe’s main global partner as if they were wonderful and should be preserved. It also stems from a fantastical vision of global trade, imagining that the US market could be replaced by others.

What’s worse is that some seem to believe all of this is Trump’s fault—a favourite in today’s economic analysis—and that in four years, a Democratic president or a softer Republican will return everything to the way it was in 2024. This is a mistaken vision. Biden kept all the tariffs from the Trump and Obama administrations and increased several of them.

Why wasn’t there a significant outcry when the EU implemented substantial trade barriers or when Democratic presidents established tariffs? The outrage frequently conceals bias against Trump and conveniently overlooks Europe’s persistent imposition of new barriers on US products. Why wasn’t there an outcry over the EU’s tariffs on US chemicals, agriculture, livestock, automobiles, and manufacturing equipment—or over the 2030 Agenda, the New Green Deal, the CO₂ tax, and all the constant excessive regulation? It took Draghi to remind us that the EU imposes more hidden tariffs on itself than the United States does.

Many claim that if the EU and others set up trade barriers, the US response should be to remove, not add, tariffs. That sounds beneficial in theory but fails to consider the full geopolitical, monetary, and commercial picture. The United States would not just lose in manufacturing and the role of the US dollar with oversized trade deficits; it would also end up absorbing the overcapacity and subsidising the working capital problems of other countries. America’s trade deficit doesn’t originate from free-market cooperation but largely from politically imposed barriers on US companies. This is why many countries would prefer a 15% tariff to removing all their non-tariff barriers.

We cannot ignore the significant tariff and non-tariff barriers that have been explicitly established to exclude US products, which are then utilised to benefit politically connected countries—such as Turkey or Morocco in relation to the EU, or even China.

The number of zero-for-zero tariff sectors is clearly positive and the list is expected to increase over time. Lifting some of the EU’s non-tariff barriers is also positive and in line with the recommendations of the Draghi report.

By accepting a 15% tariff instead of eliminating all their non-tariff barriers, America’s trading partners are admitting they would rather pay the cost than relinquish regulatory power, and they acknowledge there is no simple way to just replace the US consumer.

It’s also disingenuous to claim that buying American energy is pricier than buying Russian energy. Such arguments reveal the enormous bias and contradiction, especially given record European imports of Russian LNG in 2024. This agreement helps diversify supply and ensures security during crisis periods.

Some media outlets have misrepresented the agreement’s military equipment element. It is false that the agreement requires the EU to buy only US military equipment. These are two distinct topics, and the agreement does not reduce investment in European companies. The commitment is positive for the EU’s rearmament plans and does not undermine domestic investment projects.

European Keynesian analysts, who have quietly observed massive tax hikes and employment cost increases of over 50%, cannot credibly claim that a 15% tariff is devastating when just recently they insisted 30% tariffs would have a minor impact. The consensus estimates indicated that the impact for the EU would only be between 0.3% and 0.5% over three years. The ECB and other institutions described the effects as “manageable,” “bearable,” and having a low impact on inflation.

The Keynesian consensus can’t, on the one hand, say a 30% tariff would have a limited, bearable impact and minimal inflation effect, and a few months later insist that a 15% tariff would be disastrous. This only serves to support the narrative that anything agreed upon by Trump must be detrimental.

The EU could have negotiated for zero tariffs if it had agreed to eliminate all non-tariff barriers; however, it chose a compromise to maintain most of its regulatory framework. IIn any case, this outcome is much more favourable than losing the trade surplus and access to the US market. Therefore, the EU does not “lose”; instead, it accepts a small tariff, similar to Japan, the UK, and South Korea, because it prefers to maintain most of its non-tariff barriers.

The truly devastating alternative would have been losing market share to other countries and maintaining barriers that perpetuate European economic stagnation, not to mention missing out on a key agreement for defence, technology, and energy.

Everyone benefits from deals that establish a fairer and more open trade framework than what existed in 2024. Conservative estimates place the benefit for the EU at about €150 billion annually, assuming the fulfilment of commitments.

Both the United States and the European Union benefit from an agreement that strengthens trade ties, corrects an unfair trade deficit, removes barriers, and increases the number of zero-tariff sectors. Additionally, both sides gain a crucial alliance in defence, energy, and technology—all without limiting investment in their homegrown industries.

The only real alternative was no deal, which would ruin the EU’s economy and trade. The negotiators from the EU and the US recognised this situation and successfully reached a significant agreement that benefited both parties.