Competitiveness Check—July 31 Edition

The Quick Take

As the saying goes, a week is a long time in politics. The United States and the EU have announced a new framework trade deal. The agreement has been characterized as a strategic win for the United States, despite the likelihood of higher consumer prices domestically. In Europe, the commentary has been largely critical. French Prime Minister François Bayrou denounced the deal as an act of “submission”, while German Chancellor Friedrich Merz warned that the tariffs will cause “considerable damage” to the German economy.

On some issues—notably tariffs on sectors under a Section 232 investigation, including pharmaceuticals and semiconductors—leaders on opposite sides of the Atlantic cannot seem to agree on what they have agreed on. Further details will continue to unfold as the official text becomes available. In the meantime, dive into Penny Naas’ analysis here.

Top Five Transatlantic Trade-Related Developments

• July 21: The UK government published its Financial Services Growth and Competitiveness Strategy. The ten-year plan covers six areas of focus: delivering a competitive regulatory environment; harnessing UK global leadership in financial services; embracing innovation and leveraging UK fintech leadership; building a retail investment culture and delivering prosperity through UK capital markets; setting the UK financial services sector up with the skills and talent it needs; and realizing the economic potential of financial services clusters. 
  
• July 23: The 30th EU-Japan Summit in Tokyo saw the launch of the EU-Japan Competitiveness Alliance, aimed at deepening cooperation on digital technologies, energy security, and critical raw materials. Japan’s expected association with the EU’s research and innovation program, Horizon Europe, will further boost joint research. Despite joint commitments to strengthen economic security, the unified front was somewhat undercut by both sides’ striking respective trade deals with the United States.
  
  That same day, the White House unveiled its AI Action Plan following US President Donald Trump’s January executive order on Removing Barriers to American Leadership in AI. The Plan outlines over 90 federal policy actions across three pillars: Accelerating Innovation, Building American AI Infrastructure, and Leading in International Diplomacy and Security. Key initiatives include promoting secure, full-stack AI exports to allies; expanding data center and semiconductor capacity; eliminating regulations that hinder AI development and deployment; and upholding free speech in frontier AI models. 
  
• July 24: The 25th EU-China Summit in Beijing, marking 50 years of diplomatic ties, yielded limited results. A vague joint statement on climate was issued, and both sides agreed to establish an “upgraded export supply mechanism” to address rare-earth bottlenecks, but there was no progress on resolving trade tensions, particularly around electric vehicle tariffs. The summit outcome was largely seen to underscore the widening gap between Brussels and Beijing. Read Noah Barkin’s insights here. 
  
• July 27: The United States and the EU announced a new framework trade deal. A baseline 15% tariff applies to most EU goods entering the United States, including autos and auto parts, semiconductors, and pharmaceuticals. This is lower than the 20% initially proposed by President Trump, and lower than his subsequent threats of 50% and then 30%. However, it is above the 10% that the EU was keen to maintain. With the 15% tariff rate, the EU remains on par with Japan, a little below some of the ASEAN nations, but above the United Kingdom. 
  
• July 30: Trump confirmed in a proclamation that the United States will impose a 50% tariff on copper imports, effective August 1. The tariff, applied under Section 232, does not include raw input materials, as had been widely expected. The proclamation clarifies that the IEEPA Reciprocal will continue to apply to the non-copper content value of covered articles. The copper tariffs will not stack with existing Section 232 automotive tariffs. The United States intends to coordinate with the United Kingdom to adopt a structured approach in line with the US-UK deal announced on May 8. There is no mention of coordination with the EU. 
  
  Additionally, Trump signed an executive order suspending duty-free de minimis treatment for low-value shipments. Effective August 29, imported goods sent through means other than the international postal network that are valued at or under $800 and that would otherwise qualify for the de minimis exemption will be subject to all applicable duties.

Figure of the Fortnight

$600 billion: The amount the EU has agreed to invest in the United States over the course of Trump’s term (in addition to the current $100 billion in annual investments). The extra investments pledged under the framework trade deal would come from the private sector, raising questions about feasibility and the consequences for domestic investment. The EU has also agreed to purchase $750 billion in US energy exports through 2028.

Quote Unquote

“It's a giant deal with lots of countries because as you know, Ursula represents a lot of countries, not one country.… So we're going to do the following. The European Union is going to agree to purchase from the United States $750 billion worth of energy…. They are going to agree to invest into the United States $600 billion more than they're investing already.… They're agreeing to open up their countries to trade at zero tariff, so that's a very big factor.… I think it's great that we made a deal today instead of playing games and maybe not making a deal at all. I think it's, I'm going to let you say, but I think it's the biggest deal ever made.”

—US President Donald Trump at a July 27 press conference with European Commission President Ursula von der Leyen.

“We have a deal. We have a trade deal between the two largest economies in the world. And it's a big deal. It's a huge deal. It will bring stability, it will bring predictability. That's very important for our businesses on both sides of the Atlantic. It's 15% tariffs across the board, all-inclusive. The investments Mr. President just described that [are]  going to go to the United States and the purchases over there. Indeed, basically the European market is open. It's 450 million people. So it's a good deal. It's a huge deal with tough negotiations. I knew it at the beginning and it was indeed very tough, but we came to good conclusions for both sides.”

—European Commission President Ursula von der Leyen at a July 27 press conference with US President Donald Trump