Trump wins the tariff brawl: EU accepts 15% tariff and agrees to buy $750B in US energy with nothing in return
Jul 28, 2025
Key Points
- The EU accepted 15% tariffs on US exports while securing zero tariff reciprocity and committing to $750 billion in US energy purchases, a deal negotiated in 45 minutes at Trump's Scottish golf course.
- Japan's stock market and bond yields surged on similar tariff capitulation, with Japanese automakers among the biggest gainers despite facing the same 15% duties as EU competitors.
- Trading partners from Japan to the EU folded one by one rather than coordinate unified resistance, emboldened by Trump's credible threats backed by US economic strength and tariff revenues without visible inflation damage.
Summary
Trump has secured a series of trade victories by abandoning the game-theory logic that typically constrains bullying tactics. The EU deal, struck Sunday at Trump's Scottish golf course, exemplifies the pattern. The EU accepts 15% tariffs on exports to the US while facing zero tariffs in return. In exchange, the EU commits to buying $750 billion in US energy, investing $600 billion in unspecified domestic projects, and purchasing American weapons. The deal was negotiated in 45 minutes and the EU receives nothing concrete in return.
This arrangement follows Japan's similar capitulation days earlier, which broke what appeared to be a unified front among US trading partners. Game theory suggests that coordinated resistance hurts the bully more than the victims, but trading partners from China to Canada to the EU threatened retaliation and then folded one by one.
The collapse of collective defense reflects two reinforcing dynamics. Tariffs have generated revenue for Washington without triggering visible inflation or profit damage, and the US economy remains strong—facts that have made Trump's threats credible. Trump has escalated demands repeatedly to signal he means business, while his targets failed to coordinate a unified response.
Japan's stock market jumped on the deal news, with automakers—the supposed targets of 15% tariffs—among the biggest gainers. This apparent paradox emerges because Japanese exporters now pay 15% tariffs while US domestic automakers face tariffs on all imported components, including 50% on steel. Tesla dominates the S&P auto sector and drives its volatility, obscuring the broader competitive picture. Japanese bond markets also moved sharply, with the 10-year JGB yield jumping from 0.25% to 1.6%, signaling that local investors no longer see political and trade uncertainty as a barrier to Bank of Japan rate hikes.
The China deal remains delayed, but Trump approaches those negotiations from a position of strength. He has secured beneficial outcomes with every other major trading partner that has completed negotiations.
Markets have responded positively to these outcomes, with equity indices hitting all-time highs, treating the deals as avoidance of the threatened 30% EU tariff rather than as net-negative trade terms for US partners.