In the wake of the newly reached EU-US trade agreement, experts have expressed cautious optimism, noting its potential to boost market sentiment and ease the uncertainty that has long weighed on transatlantic business confidence.
Nicola Mai, Economist and Sovereign Credit Analyst at PIMCO: “While not all details have been ironed out, we now have a good idea of what the US-EU trade agreement looks like following weeks of negotiations. Prior to the announcement, our baseline was an all-in increase in tariffs on the EU of around 15 percentage points. What’s been announced looks very much in line with our expectations. According to our modelling, we think this will weaken Eurozone growth by almost 1 percentage point vs counterfactual, likely bringing growth to a near-halt over the coming couple of quarters. However, the impact of trade policy uncertainty on corporate behaviour is difficult to estimate and we will continue to watch data closely to assess the degree of the upcoming slowdown and the likely policy response.”
Janet Mui, head of market analysis at RBC Brewin Dolphin said:
“The agreement is undoubtedly positive for market sentiment, as it removes a major overhang on the uncertainty that had weighed on transatlantic business confidence.
Crucially, the deal covers the autos and pharmaceutical sectors, which were the most contentious and exposed areas.
That said, the deal is somewhat imbalanced against the EU. Although much lower than the worst case, the upcoming tariffs are still higher than at pre-dispute levels. While this is far from ideal, clarity is better than chaos, as businesses can then plan, adjust and adapt.”
Chris Beauchamp, Chief Market Analyst at global trading and investing platform IG, said:
“For the second time in a week President Trump has been able to proclaim a trade deal with one of the US’ key partners. Like the Japan deal, it seems to involve the US slapping on tariffs while the other side pledges to open up its markets. But for stock markets the key element is that a deal has been done, and at a lower tariff level than feared.”
Tariffs continue to be defanged as an issue, and the announcement of yet another 90 day pause for China merely underlines the view that Washington is now closing down the issue having gained a series of ‘wins’. Now we wait to see whether the tariff price increases do start to show up in inflation data.”
Martin Wolburg, Senior Economist at Generali Investments:
“The period of elevated uncertainty in the aftermath of Liberation Day about US-EU trade seems to have come to an end for now. On Sunday, both sides agreed that from Aug 1 onwards the US will impose a 15% tariff on most EU exports while the tariff rate for steel and aluminium will stay at 50% for the time being. However, the agreement foresees zero tariffs on some products like aircraft, some chemicals and agricultural products. The two parties seem to have different interpretations on selected details, especially on pharmaceuticals and metal tariffs – hence some clarity is still missing.”
