Europe’s dissatisfaction is spreading, and the US-Europe trade agreement faces the risk of “breakdown.”

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Due to the unilateral expansion of tariffs by the United States, a sense of frustration is rapidly spreading across Europe, and the US-EU trade agreement is now teetering on the brink of collapse.

The latest trigger is the Trump administration’s decision to expand its steel and aluminum tariffs. According to CCTV News, on August 15 local time, the Trump administration announced the expansion of the 50% tariff on steel and aluminum imports, including hundreds of derivative products into the list of additional tariffs.

This move has caused a large number of European manufacturers to face actual tariffs far higher than the 15% baseline agreed upon by both sides for most products in the July agreement, causing upheaval in both European business and political circles. Some companies have already announced a suspension of exports to the US and halted related production lines, citing new tariff barriers and unpredictable costs.

Unexpected Tariff Shockwaves

According to CCTV News, on July 27 local time, US President Trump stated that the United States had reached a trade agreement with the EU, imposing a 15% tariff on EU goods exported to the US.

This agreement was once seen as a “truce” to prevent a full-scale trade war between the two sides. However, the US Department of Commerce's move last month to expand the scope of metal tariffs completely upended European companies’ expectations. According to the new rules, tariffs are no longer limited to raw materials such as steel and aluminum and metal parts like screws, but are extended to finished products that use these metals.

The direct result of this expansion is a significant increase in the actual tariff costs of European products. Bertram Kawlath, Chairman of the German Mechanical Engineering Industry Association (VDMA), pointed out:

“About 30% of machinery products exported from the EU to the US now have to pay a 50% tariff on their metal content portion.”

For a machine worth $1 million, with steel costs accounting for 20%, the total tariff will amount to $220,000, equivalent to a 22% overall tariff rate, far exceeding the 15% stipulated in the agreement.

This complex and punitive tariff calculation has caught European manufacturers off guard. In a letter to EU Commission President Ursula von der Leyen, VDMA warned that the industry is facing an "existential crisis".

From “Reluctant Acceptance” to “Public Opposition,” Discontent Spreads

In addition to the direct increase in tariff costs, the bureaucratic burden brought by the new rules is severely disrupting business operations.

Bernard Krone, head of German agricultural equipment and commercial vehicle manufacturer Krone Group, revealed that after the new regulations took effect, the company had stopped exporting to the US, suspended production for the US market, and put 100 workers on leave. The company is even considering redirecting shipments already en route to Mexico and Canada.

Krone said that now, companies must provide detailed records of the steel and aluminum content in thousands of components in their products. For example, its Big X forage harvester contains 15,000 parts. This traceability requirement is extremely complex, and even companies whose products are not on the tariff list may be affected.

With the impact on businesses becoming evident, political discontent is also rapidly rising.

Bernd Lange, Chairman of the European Parliament Committee on International Trade and German politician, bluntly stated that the current US-EU agreement "lacks security and predictability". He said that in light of the current situation, he expects lawmakers to demand changes to the legislative proposal aimed at reducing US tariffs on some EU products.

Lange questioned:

"Since European manufacturers now have to pay not only a 15% tariff but also extra steel and aluminum tariffs, why should the EU continue to grant zero tariffs to US motorcycles?"

This sentiment is echoed in the business community. The initial reluctant acceptance of the agreement is rapidly turning into open opposition, and the legitimacy and future implementation of the agreement are facing a severe test.

Uncertain Negotiation Prospects

In the face of strong European dissatisfaction, the prospects for a negotiated solution remain unclear.

EU Trade Commissioner Šefčovič said he knows the US side “understands the issue” and is aware of the EU position, but “dare not say when it will be resolved.” Previously, both sides agreed to negotiate a quota system that would allow a certain amount of EU steel and aluminum products to enter the United States at lower tariffs, but so far there has been no progress in these negotiations.

What makes businesses even more uneasy is that the US has stated it will review the metal tariff list every four months, resulting in ongoing uncertainty for long-term business planning.

The VDMA is pressuring the European Commission to fight for a 15% tariff cap for mechanical products, on par with automobiles, semiconductors, and pharmaceuticals. However, in the absence of effective communication and mutual trust, it is unlikely this tariff-driven trade dispute will subside in the short term.

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