Last week, the European Union threatened to unleash its “nuclear” option if the U.S. refused to compromise in trade talks. On Sunday, Brussels bowed to demands from across the Atlantic. Some call it a strategic blunder. Others say it’s a clever bluff.
“They accepted a 15 percent tax as if it was a gracious gift, and not an extortion,” said Sébastien Platon, professor of public law at the University of Bordeaux.
Yet he also believes the EU may have quietly turned the tables. “On closer look, the Commission might have fooled Trump to an extent,” he said.
The agreement, announced on Sunday, allows the U.S. to impose a 15 percent tariff on European goods, down from the 30 percent initially floated by the White House. In exchange, the EU pledged to increase imports of American energy and military equipment.
The shift is striking. Only days earlier, Brussels had publicly threatened to trigger its Anti-Coercion Instrument - the ‘nuclear option’ - if talks failed. But instead of escalating, the EU has now seemingly accepted the tariff terms and pulled back from its most forceful tools.
Legal weight unclear
Whether that deal carries legal weight is unclear, and central to Platon’s analysis. If it mirrors past U.S. agreements like the one struck with the U.K., it is likely not a binding treaty at all, but a collection of unilateral political gestures.
That means either party can walk away at any time. Even if it were formalized as an international treaty, it would still require approval from the EU’s individual member states and in the end the European Parliament. Those are obstacles that could delay or derail implementation.
“On closer look, the Commission might have fooled Trump to an extent.”
Sébastien Platon, University of Bordeaux
“The Commission promised several things in exchange for the reduced tariffs: more European purchases of U.S. energy and military equipment, and increased investment in the U.S.,” Platon said. “But Brussels has no power to control any of that. Member states make those decisions, not the Commission.”
That has led some observers to suggest the EU gave Trump what he wanted most: a political win. In reality concessions were kept vague or unenforceable. “Europe seems to have found an interesting way to deal with Trump: giving him a facade win, and then fine-tuning the details, which he does not care about, to their advantage,” Platon said.
Damage control
Investors, too, question what the deal is really worth.
“The much-lauded 600 billion dollars in investments and 750 billion dollars in U.S. energy imports sound more like wishful thinking than concrete policy,” wrote Apolline Menut, economist at Carmignac, in a note to clients.
“Especially on energy, the numbers don’t add up. Even at full export capacity and current prices, the U.S. could barely deliver 150 billion dollars—far below the 250 billion dollars von der Leyen cited.”
“This isn’t a trade breakthrough,” Menut added, “but damage control in the service of diplomatic pragmatism. The EU swallowed a bitter pill in exchange for geopolitical stability. The economic costs may be painful, but the strategic calculus is brutally rational.”
Others, however, don’t see such a strategy. To them, it’s a political blunder.
“What makes this capitulation particularly damaging is how unnecessary it was,” said Alberto Alemanno, professor of EU law at HEC Paris. “The EU possesses enormous leverage as America’s largest trading partner.”
Alemanno points to the roughly one trillion dollars in annual bilateral trade between the two economies. While the U.S. runs a 235 billion dollar goods deficit with Europe, the EU posts a 148 billion dollar deficit in services. That is an area where it could have retaliated. Digital services taxes or restrictions on U.S. tech firms, he argues, would have given Brussels meaningful leverage.
“European capitals had prepared 93 billion dollars worth of retaliatory tariffs,” Alemanno said. “But they refused to authorize Von der Leyen to use them. That forced her to negotiate from weakness. And yet the EU didn’t even try it.”
For Alemanno, the problem is not the text of the agreement, it’s the precedent. “This is a dangerous game,” he said. “The EU is accepting to depart from WTO obligations and de facto endorses Trump’s worldview.”
Eurozone growth will stall
With Von der Leyen facing criticism across the political spectrum and key member states lukewarm on the deal, the path to ratification remains uncertain. German industry groups have already called the new tariff rate “too high,” warning of damage to export-heavy sectors.
Some asset managers are also bracing for impact. Pimco expects the new trade agreement to shave nearly a full percentage point off eurozone growth, as fresh tariffs weigh on corporate sentiment and cross-border investment.
“The announced measures align with our expectation of a tariff increase of around 15 percentage points,” said Nicola Mai, economist at the two trillion dollar asset manager. “That will bring growth to a near standstill over the coming quarters.”
Despite those warnings, markets shrugged. The initial reaction was modest. The dollar rose against the euro and yen, while global equities hovered near record highs. Strong earnings, enthusiasm for artificial intelligence, and expectations of eventual trade stability supported investor sentiment.
“The removal of uncertainty for the U.S.-EU relationship was a relief,” said Phil Orlando, chief market strategist at Federated Hermes. He noted that a 15 percent tariff was “a lot better than some of the ridiculous numbers that were being thrown around back in the first week in April,” he told Reuters.
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