European stocks rose to 4-month highs after the European Union agreed a deal with Donald Trump to set tariffs on exports to the US at 15%.
European stocks climbed to 4-month highs after the European Union (EU) and the United States (US) signed a trade deal. The agreement was reached just before the deadline of 1 August, which could have imposed higher tariffs on the bloc.
The US-EU trade agreement sets a 15% tariff on most EU goods going to the US. It also includes a commitment from the EU to invest around $600 billion into the US economy going forward.
European stocks rise on Monday morning
In early trading, the pan-European STOXX 600 index rose 0.8%, Germany’s DAX gained 0.7% and France’s CAC 40 increased 1.1%. Over in the UK, the FTSE 100 edged up by 0.3%, helped by gains in pharmaceutical and tech shares.
Across Europe, leading companies saw a notable increase in their stock price on Monday. Pharma giants Novo Nordisk and Roche initially rose by 0.4% and 1.4%, respectively, before retreating slightly.
The trade deal offered some certainty to car makers after several months of volatility. Car parts suppliers Valeo (5%) and Forvia (15%) both advanced shortly after the Monday opening. Meanwhile, shares in Stellantis, Porsche and Mercedes-Benz Group increased more than 2%.
EU trade deal to boost US government revenue
By signing such a deal with the EU, Trump hopes to boost US government revenue. The trade agreement will bring in roughly $90 billion of tariff revenue to US government coffers. These figures are based on last year’s trade data.
As part of the agreement, the EU will also buy US energy products and arms worth hundreds of billions of dollars. Trump said the EU would increase its investment in the US by $600 billion, including American military equipment, and spend $750bn on energy.
Last year, trade in goods between the EU and US totalled around $976 billion. There was a large imbalance, or trade deficit between the two, with the US importing about $606 billion in goods from the EU and exporting around $370 billion.
Reaction to the US-EU trade deal
Upon announcing the agreement, European Commission chief Ursula von der Leyen praised the US-EU trade deal. She described it as “a big deal, a huge deal” that would bring “stability” and “predictability” to both sides.
These sentiments were echoed by President Donald Trump, who said: “I think it’s great that we made a deal today, instead of playing games and maybe not making a deal at all. I think it’s the biggest deal ever made.”
As for other European leaders, German chancellor Friedrich Merz expressed his support for the deal. He claimed that it avoided “needless escalation in transatlantic trade relations” and averted a potentially damaging trade war.
However, France’s prime minister, François Bayrou, was critical of the deal, stating that Europe had submitted to the US. He said: “It is a dark day when an alliance of free peoples, gathered to affirm their values and defend their interests, resolves to submission.”
Don’t forget to keep track of all the latest Market News at FXTrustScore.com.
