‘It’s worse than it was 12 months ago, but it’s better than it was two weeks ago,’ says Jason Hungerford (pictured right), head of international trade at Mayer Brown’s London office, following the conclusion of EU-US trade negotiations.
Announced at the end of July, the agreement will impose a 15% tariff on the majority of European imports to the US, meaning the EU will avoid the much higher tariffs roiling global markets, including 35% for Canada and 39% for Switzerland.
But while the deal has been met with relief in many quarters, questions remain over how binding the framework actually is, as well as what its impact on global markets will be.
‘More like appeasement than an actual deal’
One emerging viewpoint among trade lawyers is that the deal can be more accurately described as a political resolution to avoid further tariff increases and quell market volatility.
Aline Doussin, head of international trade and investment at Hogan Lovells, characterises the deal as a political declaration. ‘My immediate reaction is that this is not a binding legal agreement,’ she says. ‘The legal reality has not changed as yet on the EU trade law side.’
‘The ink isn’t even dry, but there’s no ink because it hasn’t even been written yet,’ says Dr Totis Kotsonis, head of subsidies, procurement, trade agreements and remedies at Pinsent Masons. ‘The question is: have we moved on from the unpredictability, and have we given businesses the stability that they require in order to operate and to plan ahead? I don’t think that we have.’
‘My first impression is that it feels more like appeasement than an actual deal. There was a threat, and the EU has at least for a time neutralised it.’ adds Hungerford. ‘A common refrain amongst trade lawyers working on free trade agreements is that |nothing’s agreed till everything’s agreed”, and I think everything being agreed is still at some undetermined point in the future.’
‘Non-standard economic coercion’
Kotsonis points to the need for security in agreeing the deal: ‘The EU was effectively stuck – they had no other viable choice but to accept what was on offer,’ he says. ‘The elephant in the room here is the fact that Europe and the EU are dependent on the US for their security.
‘There’s a lot of unpredictability, but the last thing the EU wanted is escalation – nobody can afford the EU and the US starting a full-on trade war that could escalate into other areas like security.’
Doussin (pictured right) points to the need for stability and reassurance in the market. ‘The key message that everyone in the EU agrees on is that certainty is definitely welcome – both clients and the market were very very nervous of the 1 August deadline to make a deal. So putting a pause on that is very much welcome by the market.’
Referring to the atmosphere of volatility around global trade since US President Donald Trump’s ‘Liberation Day’ tariffs announcement on 2 April, Hungerford says that the US administration had been using ‘non-standard economic coercion’ to achieve their aims. ‘We haven’t really seen that use of those kinds of provisions before,’ he says. ‘It feels like everything’s on the table when it comes to the US achieving its aims.’
The deal also carves out exemptions from the 15% tariff, with European Commission President Ursula von der Leyen noting that tariffs would be cut to zero on products including aircraft and component parts, certain chemicals, and critical raw materials.
Hungerford welcomes this aspect of the agreement, but cautions that challenges remain. ‘It’s got the EU past a difficult position, and there’ll be some immediate relief which will be of great consequence to certain sectors such as aerospace – but we’re not out of the woods yet,’ he warns.
And there are areas of the framework agreement that raise as many questions as they answer.
‘Some aspects of the deal just seem unrealistic to implement or enforce, such as the obligation of the EU to purchase oil and gas in a value of €750m over three years,’ says Baker McKenzie Amsterdam tax partner Nicole Looks, . Capacity in the US is not yet there to satisfy such high demand, and the infrastructure is not there to transport these volumes of LNG from the US to the EU.’
Doussin highlights another legal concern: ‘The big question is whether the deal is compatible with World Trade Organization law, and whether the EU will now be required to open its market to all trading partners on the same terms as those agreed with the US.’
‘Positive mood music’
Jessica Adam (pictured right), co-head of corporate and M&A at Macfarlanes, acknowledges that while uncertainty around the deal remains, dealmakers are taking a pragmatic view: ‘We have to work with the information we have today. Things may change in the future; however, there is always going to be a degree of uncertainty and that needs to be priced in.’
Key metrics from the European Commission’s business and consumer survey results reflect the tentative optimism building in the markets throughout July. The Economic Uncertainty Indicator increased by one point to 17.3, while the the Economic Sentiment Indicator picked up in both the EU (+1.0 points to 95.3) and the euro area (+1.6 points to 95.8).
Speculating on the market impact of the agreement from a business perspective, Adam strikes an optimistic chord: ‘I think we will see an uptick in deal volumes. We’ve already started to see private capital funds gearing up processes to kick off in Q3 and Q4, and doing prep work with a view to launching in Q1 2026.’
And while the UK is not party to the deal, the resulting shift in relative tariff burdens could have knock-on effects: ‘Conversations with private capital funds focused on the UK suggest an increasingly positive outlook, with the UK potentially being seen as a more attractive place for investments compared to the EU, given the 5% tariff difference. There is definitely more positive mood music.’
At Fremantle, chief legal officer M
Stephanie Lopes, chief legal officer at payments company Volt (pictured right), is on the same page about the ‘huge importance’ of AI, and is factoring it into her interviews when recruiting. ‘I’ve included questions around its usage; how comfortable candidates are using it and how much do they understand,’ she says.
