The EU-US trade agreement has been reached, but is this just a unilateral concession from the EU?
According to CCTV News, the United States and the European Union have reached a tariff agreement with a 15% tax rate. Ursula von der Leyen stated that this is the best outcome the EU could achieve.
On Monday, July 28, according to the Chasing Wind Trading Desk, Deutsche Bank released a report indicating that while the EU-US trade agreement avoids an escalation of the trade war, the economic costs and investment impacts still need to be cautiously assessed. Key impacts include that the EU's investment in the US amounts to $600 billion, which may weaken the EU's potential growth capacity. The EU will procure hundreds of billions of dollars in US-made military equipment and will continue to rely on the US military industry in the short term.
Additionally, a key impact includes the reduction of automobile tariffs from 25% to 15%, which is favorable for the EU. In terms of monetary policy, the pressure for the European Central Bank to cut interest rates has eased, and a 2% policy rate may become the endpoint of this round of easing.
<h2>EU Concessions: Energy and Military Purchases Will Shift Significantly to the US</h2>
As part of the agreement, the EU made significant economic concessions.
Previously, the market widely expected that to reach an agreement, the EU would commit to purchasing more liquefied natural gas, agricultural products, and military equipment from the US. The final agreement revealed that the EU will procure energy products from the US totaling $750 billion. European Commission President Ursula von der Leyen stated that this procurement plan amounts to approximately $250 billion per year over three years.
In terms of military procurement, President Trump stated that the EU will purchase &#34;a large quantity&#34; of military equipment, with a total amount reaching &#34;hundreds of billions of dollars.&#34; Given NATO's recent increase in defense spending targets, this arrangement is not surprising.
As European domestic military production capacity still requires time to expand, the EU will continue to rely on US military suppliers in the short term. It is estimated that from the start of the Russia-Ukraine conflict in 2022 to 2024, about half of the approximately €200 billion in defense equipment spending in Europe will flow to US military enterprises.
<h2>EU's $600 Billion Investment in the US May Weaken Its Own Growth Potential</h2>
According to the agreement, one of the EU's most important export sectors—the automotive industry—will be subject to a 15% tariff, significantly down from the previous 25%. Additionally, the 15% tax rate also applies to the pharmaceutical and semiconductor industries, which are also important export sectors for the EU.
However, tariffs on steel and aluminum products remain at a high rate of 50%, while tariffs on alcoholic products are still under negotiation. Some &#34;strategic products&#34; such as aircraft, key raw materials, and certain chemicals and agricultural products will be exempted.
German Chancellor Merz welcomed this agreement, viewing it as a positive signal for Germany and the EU.
The agreement also includes the EU's commitment to invest $600 billion in the US, similar to the previous US-Japan agreement. However, the specific details of this investment plan are yet to be announced.
The EU itself is currently facing significant investment needs. Former European Central Bank President Mario Draghi estimated last year that the EU has an annual investment gap of about €800 billion in innovation, energy, and defense. Against this backdrop, the EU's substantial funds directed toward the US may weaken its own potential economic growth capacity, raising concerns among some observers.
However, there are also opposing views, arguing that this agreement at least ensures the continuation of open trade relations between the EU and its largest trading partner, providing certainty for businesses and potentially offsetting some negative impacts.
Deutsche Bank previously estimated that a 10% tariff would have an approximately 0.4% impact on EU GDP. Now, with the disclosure of the agreement details, Deutsche Bank will reassess the economic costs. Deutsche Bank stated that a 15% tariff on the automotive industry would help reduce the previously estimated costs, but a 15% tariff on the pharmaceutical and semiconductor industries would increase costs. Ultimately, the economic cost will depend critically on the direction of this $600 billion investment. If these investments shift from within the EU to the U.S., it could weaken the EU's long-term growth potential.
<h2>ECB Rate Cut Pressure Eases, 2% May Be the Endpoint of the Current Easing Cycle</h2>
In terms of policy, the European Central Bank's baseline scenario previously assumed a 10% tariff level. Deutsche Bank pointed out that although the final tax rate is 15% and there is an additional $600 billion investment in the U.S., due to a significant reduction in trade uncertainty and von der Leyen emphasizing that the agreement is the &#34;optimal solution within a controllable range,&#34; Deutsche Bank expects the ECB will not view costs as significantly rising. At the same time, considering ECB President Lagarde's recent unexpectedly hawkish statements, the likelihood of the ECB continuing to cut rates is diminishing if no external shocks occur.
Nevertheless, Deutsche Bank noted that the market generally expects inflation to be below the 2% target in 2026, so the ECB may still cut rates again for &#34;risk management&#34; purposes. Particularly if the euro continues to appreciate, this would further suppress inflation, making actual inflation even lower than the target level.
However, in the absence of new shocks or significant surprises, the current 2% policy rate is increasingly likely to become the &#34;terminal rate&#34; of this easing cycle. It is expected that after the inflation cycle bottoms out in the first quarter of 2026, market attention will gradually shift to three points—fiscal easing scale, its upward risks to inflation, and the timing and magnitude of ECB rate hikes

Deutsche Bank AG pointed out that although the trade agreement between Europe and the United States has avoided an escalation of the trade war, the economic costs and investment shifts it brings need to be carefully assessed. Key impacts include the European Union's commitment to invest $600 billion in the U.S., which may weaken its own long-term growth potential. The reduction of tariffs in the automotive industry from 25% to 15% is beneficial for the EU. The pressure for the European Central Bank to cut interest rates has eased, and a 2% policy rate may become the endpoint of this round of easing

- The U.S. and EU have reached a 15% tariff agreement, with the EU making significant economic concessions, including a commitment to purchase $750 billion in energy products from the U.S. over three years.  
- The agreement reduces auto tariffs from 25% to 15%, benefiting the EU, but raises concerns about the potential weakening of the EU's growth capacity due to a $600 billion investment in the U.S.  
- The European Central Bank may face reduced pressure to cut rates further, with the current 2% policy rate likely becoming the endpoint of the easing cycle, depending on future economic conditions.

Deutsche Bank evaluates the US-EU trade agreement: The EU makes significant concessions, which may affect long-term development