The Boomerang Effect: Why America’s EU Trade Deal Might Hit Them Back Hardest

Within a verdant golf course in Scotland, the “Turnberry Agreement” was signed and commemorated as the heroic deal which ceased the possibility of the transatlantic alliance’s collapse through its prevention of a decimating 30% tariff being put on the EU by America^[1] [2]. However, this did not come without compromise: the EU’s signing of a $750 billion check for American LNG (liquified natural gas), and pledge of making U.S. industrial products the star of the EU's market, including American cars^[3]. Initially, this may be seen as economic leverage for America, but upon looking at the EU market, one realises how improbable America’s expectations for the EU market are. With narrow streets, public transport, and environmentally-conscious consumers driving EVs, demand for gargantuan American gas-fuelled cars can be predicted to be low in the EU market, which would lead to the stores of renowned American car companies, such as Ford, transforming into a vehicle garage sale. Long-term, imposing such demands on the EU (the US’ largest trading partner) will only construct a future boomerang hitting American consumers directly through inflation and retaliatory taxes.

The car deal made in Turnberry along with the US’ imposed tariff on the EU is structurally disadvantageous to the American auto industry. Given that for many American auto companies such as Ford, whose cars range from being 34% to 85% composed of imported components, the tariffs set by America is only going to increase the cost of these components that American auto companies utilise^[4]. Consequently, this will increase American auto companies’ cost of production, raising prices of American cars sold in Europe. However, for EU auto companies because they are based in the EU their cost of production will remain the same as the raw materials for most of their cars are mainly domestically produced. As a result, this gives EU auto companies leverage over American ones, undermining the goals set in the Turnberry car deal. 

In addition, the car deal fails to look at whether there is any consumer alignment between the European market and American cars. In fact, American cars completely oppose the cars that are convenient and wanted from those living in the EU, who are pivoting towards a more virescent and urban-centred future. Gas fueled cars in the EU are taxed harshly at  and maintaining gas cars requires one to be able to consistently pay for staggering fuel prices. Thus paying for a gargantuan car that runs on gas is likely to be a major inconvenience to EU Europeans economically and logistically. Consequently, even if American companies manage to mitigate inflation from American-imposed tariffs on the EU, by that time EU’s possible transition from gas-fueled transport to EVs may already be a threat total demand for the American Car Industry in Europe, still leaving American auto companies without the promised demand from the Turnberry car deal. 

This deal seeming to not help the American automotive industry grow globally and yet yielding higher prices of American cars for everyone including those in America, due to tariffs raising production costs for American automotives; it highlights how America trying to impose protectionism through its car deal made in Turnberry is actually damaging to US citizens. 

Critically however, the heart of the EU’s economy, Germany, is experiencing a slow down in economic growth. Despite the Turnberry Agreement reducing the maximum tariff allowed to be imposed on the EU from 30% to 15%^[2], German exports still plummeted by 14% in 2025^[5]. This is due to the tariff imposed on EU products from the USA jumping from 2% to 15%^[1] [9] and with German products being of high quality and hence of high price, it makes them more elastic, hence leading to a palpable decrease in quantity demanded for German goods in America. As a consequence, as tariffs further lowered Germany's primary industries’, such as manufacturing companies, already slim profit margins, due to their high costs of production, people have been laid off in order for German companies to maintain sustainable profit margins. As a result, causing a four year record-high unemployment rate of 6.3% in Germany as of late 2025^[6]. As a result this has contributed to monetary policy divergence between the EU and the USA, with the ECB (European Central Bank) having kept their interest rate to solely 2%^[11] in an attempt to stimulate aggregate demand and in turn stimulate employment and growth, whilst the USA’s interest rates were still at 4 - 3.75% in November^[10]. Hence causing the US dollar to remain appreciative relative to the Euro^[12], especially with lowering investor confidence in the EU increasing interest rates as the 2025 went by, lowering the EUR/USD from 1.17 in August 2025 to 1.16 by November 2025. This in turn, would result in an increase in the price of American goods in the EU and would further prevent the EU market purchasing American goods, hence damaging American brands’ revenue rather than protecting American firms and their growth. 

Ultimately though, the real irony of the Turnberry Argument is that the main premise of America’s implementation of the tariff is going to directly damage America’s supply chain. Through implementing a 15% tariff on European products such as highly precise technology and industrial chemicals, relied upon by most American manufacturers to produce a myriad of products. The cost of production for most companies in America is going to increase. Hence, leading to Americans who are surrounded by American-produced products having to pay the heftiest price for their own governments implementation of ‘protectionist-induced’ tariffs. In reality, tariffs set by the American government will turn into a hidden tax that is estimated to be costing households $1300 in 2026^[9], only incentivising people to not purchase from American companies or go overseas (where prices are cheaper) and purchase products there. 

Furthermore, if the tariffs themselves weren’t bad enough for the US the EU has just enacted the ACI (Anti-Coercion Instrument), designed to act as legislative economic defense against America fighting back where it hurts most ^[7]. It states that if the USA continues to weaponise tariffs, Brussels reserves the right to firstly: impose massive digital taxes on Silicon Valley metafirms⁷, further damaging demand for American products. However ACI also reserves Brussels the right to suspend its obligations regarding the protection of American firms’ patents ^[8]. As a consequence, allowing for European companies to make generic versions of American medicine and software, essentially copying American IP without paying for the licensing fees, marking immense profit losses worth billions for America's tech and medicinal industries. This legislative retaliation would in return lead to American citizens being directly hit financially with no economic cushioning, hence destabilising the US economy rather than expanding it. 

In conclusion, America has attempted to help the US economy grow by using the textbook solution, protectionism and in turn: tariffs. However, in a globalised economic landscape that America is so interconnected with; by placing tariffs on other countries, it is going against the same factors that were propelling their economy in the first place. Consequently making American consumers pay the price. 

1. European Commission. “Joint Statement on a United States-European Union framework on an agreement on reciprocal, fair and balanced trade.”August 21, 2025. https://policy.trade.ec.europa.eu/news/joint-statement-united-states-european-union-framework-agreement-reciprocal-fair-and-balanced-trade-2025-08-21_en

2. Friends of Europe. “Turnberry: A Turning Point for EU–US Trade.” August 27, 2025. https://www.friendsofeurope.org/insights/critical-thinking-turnberry-a-turning-point-for-eu-us-trade/

3. Atlantik-Brücke. “The road to Turnberry.” September 29, 2025. https://www.atlantik-bruecke.org/en/the-road-to-turnberry/

4. Tax Foundation. “Trump Tariffs: Tracking the Economic Impact.” May 2025. https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/

5. U.S. National Highway Traffic Safety Administration (NHTSA). “Part 583 American Automobile Labeling Act (AALA) Reports.” 2025. https://www.nhtsa.gov/part-583-american-automobile-labeling-act-reports

6. Trading Economics. “Germany Unemployment Rate - November 2025.” November 2025. https://tradingeconomics.com/germany/unemployment-rate

7. European Commission. “Protecting against coercion - The Anti-Coercion Instrument (ACI).” 2024. https://policy.trade.ec.europa.eu/enforcement-and-protection/protecting-against-coercion_en

8. Norton Rose Fulbright. “EU Anti-Coercion Instrument: Key Takeaways for businesses.” December 2023. https://www.nortonrosefulbright.com/en/knowledge/publications/0c873dd6/eu-anti-coercion-instrument-key-takeaways-for-businesses

9. Barata da Rocha, M., N. Boivin and N. Poitiers (2025) 'The economic impact of Trump’s tariffs on Europe: an initial assessment'. Bruegle, 17 April 2025. https://www.bruegel.org/analysis/economic-impact-trumps-tariffs-europe-initial-assessment

10. Board of Governors of the Federal Reserve System. “Federal Reserve issues FOMC statement.” October 29, 2025. https://www.federalreserve.gov/newsevents/pressreleases/monetary20251029a.htm

11. FocusEconomics. “Euro Area: ECB holds rates in December.” December 18, 2025. https://www.focus-economics.com/countries/euro-area/news/monetary-policy/euro-area-central-bank-meeting-18-12-2025-ecb-holds-rates-in-december/

12. Trading Economics. “Euro - Currency - Historical Data.” 2025. https://tradingeconomics.com/euro-area/currency