EU Affairs Zero-for-zero for zero gain

The EU is one of them. But they’ve suffered a bit of a bumpy ride. Unhelpfully for the bloc, the US President was quoted saying that the EU was formed in order to screw the US, believing they have taken advantage of the US. What he really means here relates to his trade policy MO – the trade balance.

According to Eurostat (the EU’s ONS), in 2024, the EU exported €531.6 billion in goods to the US and imported €333.4 billion, resulting in a €198.2 billion trade surplus. Compared with 2023, exports increased by 5.5%, while imports declined by 4.0%. In 2024, transatlantic trade in goods and services reached over €1.68 billion, with both the EU and the US being each other’s top trading partner.

In 2024, EU-US trade in goods was worth €867 billion.

Top EU goods exports to the US are medicinal and pharmaceutical products, road vehicles and general industrial machinery and equipment. Top EU goods imports from the US are petroleum products and related materials, medicinal and pharmaceutical products, and power generating machinery and equipment.

In 2024, EU-US trade in services was worth around €817 billion euros.

Top EU services exports to the US are professional, scientific and technical activities, telecommunications, computer and information services and transport. Top EU services imports from the US are charges for the use of intellectual property, professional, scientific and technical activities, and telecommunications.

So that is a huge amount of money flowing between the two superpowers. But so far, the EU has been unsuccessful in its attempts to negotiate an outcome with Washington.

On 2 April, the EU succumbed to 20% tariffs. On 9 April, EU member states voted and agreed to impose retaliatory tariffs on US imports of steel and aluminium worth €22 billion. The very next day they agreed to put these countermeasures on hold for 90 days, mirroring Trump’s pause.

Also in early April, the EU offered the US a zero-for-zero deal in an attempt to avoid a trade war. This means that the EU is offering to remove tariffs on all, or almost all, industrial products if the US is prepared to do the same. However, Trump is holding firm to his 10% universal baseline tariff rate.

Trump then threatened to impose tariffs of over 50% on the EU unless they bucked up their negotiation act. And in classic Trump style, subsequently removed the threat. But Brussels is now on the clock. These high levies could be back on 9 July if an agreement isn’t reached.

Much of this is about leverage. Part of why zero-for-zero is garnering zero traction with Trump is that he isn’t ready to negotiate a reciprocally beneficial agreement. He believes that the EU has been taking advantage of the US’s low industrial tariff regime for years, and that the US therefore shouldn’t have to pay for the EU to remove their own tariffs, which Trump himself described as “egregious”. The President has clearly shown he is not willing to compromise. He’s putting America first, and he holds the cards. The other point is actually the tariffs that the EU imposes on industrial products, referring to essentially all products that are non-agricultural, are very low in the first place, thus not really serving as a particularly substantial offer.

Meanwhile, Trump is keen to penetrate the EU’s agricultural market: “They don’t take our farm products, they take almost nothing and we take everything from them… tremendous amounts of food and farm products”. But the EU’s standards on animal and food products are very high. It bans imports of hormone-fed beef, chlorinated chicken and genetically modified corn.

What do the figures really say? Since the US and the EU do not currently trade under a preferential trade deal or free trade agreement, they trade under the most favoured nation (MFN) tariffs they offer to all World Trade Organisation (WTO) members. The EU’s MFN tariff average is 5% and the US’s is 3.5%. It is important to note that MFN averages are unweighted, meaning they assume every product has an equal weight regardless of how much that product is actually traded.

However, when we look at the real-world weighted averages, which reflects actual customs revenue collected, the figures become smaller. According to the European Commission, the average tariff rate on both sides is approximately 1%. In 2023, the US collected approximately €7 billion of tariffs on EU exports, and the EU collected approximately €3 billion on US exports.

And that brings us back round to the fact that much of Trump’s tariff aggression towards the EU relates to leverage and competition.

For now, the EU and US are bullishly persevering with negotiations, each with slightly different attitudes, Trump’s being: “they’re either going to make a good deal, or they’ll just pay whatever we say they have to pay”, and Commission President Ursula von der Leyen’s being: “it’s complex but we are advancing, that is good, and I push hard to pick up more speed, so we are mixed in the negotiations, and we will see what the end brings”.