EU's Trade Deals Reach Two Billion Consumers Yet Barely Dent Reliance on Washington

The European Union has been aggressively pursuing free trade agreements since the United States effectively withdrew from traditional rules-based trade liberalization. Within months, Brussels has reached deals with Australia, India, Indonesia, and the South American bloc Mercosur - together representing more than two billion consumers, most of them in emerging markets.

Yet these deals will not enable the EU to "dramatically reduce its trade and investment reliance on the United States," Bruegel senior fellow Jacob Kirkegaard argues in Foreign Affairs, as "Hvylya" reports.

The numbers tell the story. In 2024, the EU's total goods and services exports to the United States amounted to around $920 billion. Exports to Australia stood at $40 billion, to India at $81 billion, to Indonesia at $16 billion, and to Mercosur at $31 billion. Combined, these four partners account for less than one-fifth of what the EU exports to the United States alone.

The new deals do offer EU exporters some competitive edge over Chinese firms, which still face higher tariffs in these markets. But the EU and the United States remain each other's largest trading partner and investment destination - the place where multinational firms earn most of their overseas profits. Protectionist US policies since at least 2016, including 50 percent tariffs on EU steel, aluminum, and copper, have pushed up manufacturing costs at US plants and created an uncertain business environment. Many EU and US companies have prudently postponed new capital investments despite Washington's urging.

The Turnberry agreement, once ratified by the EU, should stabilize transatlantic trade conditions by locking in US tariff rates on a host of EU goods. Kirkegaard argues that "the sheer volume of U.S.-European trade and investment leaves Europe with little prospect of meaningfully reducing the importance of this relationship anytime soon." Expanding the EU's global network will gradually diversify trade flows and help with critical mineral supply, but the transatlantic economic bond remains structurally dominant.