EU-US trade deal and where it will land in boardrooms

The EU-US trade deal and what it means for corporate governance agendas on both sides of the Atlantic: What you need to know. 

The trade deal signed between the Trump Administration and the European Commission signals some long-awaited clarity after months of speculation, risk assessments, and even the occasional bout of panic. 

While markets reacted positively to the news and politicans patted themselves on the back for a job well done, the real challenge will come to businesses in the months and years ahead. Those with any links to counterparts on the opposite side of the Atlantic will be finding their feet, trying to work out what makes sense and what doesn’t as new baseline costs are codified.

At the heart of it all are the leaders who need to oversee new strategic decisions, ensuring any choices maximise on opportunity and prepare for the worst at the same time.

You can find the specifics of the deal here.

Bad news first: The widely quoted 15% tariff applies to US companies importing from the EU. It’s a baseline figure, applied to nearly everything except limited exceptions like certain drugs, chemicals and raw materials. 

While 15% is a lot lower than the 30% Trump had previously threatened, it is still huge, and a stark departure from the next-to-zero rates US companies had been paying up till now. 

The good news is that since the agreement covers everything and was signed at the highest political circles, there is now some real predictability. Also, for some US companies in the energy and AI sectors, there is some extra relief in the EU’s promises to invest nearly $800 billion in American supplies of oil, gas, nuclear technology and chips. This could make a massive difference in some balance sheets. 

The strategic decisions ahead

• American companies with any reliance on European products now need to extensively analyse the numbers and determine how the new 15% tariff knocks their current strategies off track. 
• This will probably mean an extensive look at their supply chains, which may need to change to remain profitable. 
• It should also prompt a longer-term discussion about employment strategy. The trade deal could easily mean that it now makes more sense for US companies to produce and hire directly and within US borders, rather than rely on overseas supply.

Bad news first: The deal hasn’t gone down great in Europe. Those who have championed it have focused on the short term, stressing “we avoided a trade war.” Critics, however, have focused on the long-term and what the deal means for Europe’s ability to grow independently. From that perspective, the agreement brings far less certainty. 

So, while the damage could have been far worse, the promise of the next five to ten years doesn’t fill many with confidence. 

This will hit a lot of European corporate leaders hard. A key market is now locked behind a 15% paywall that never existed before. Under the old rules, this market was a route to intensive growth and expansion for many companies. Now, it’s an obstacle to work around. How well EU companies can do this will depend on the industry and strategy, as well as their preparation and risk scenario planning. 

The good news is that the deal has made things clearer. That will at least help with planning. 

The strategic decisions ahead

• EU leaders will need to analyse what tariffs will do to their competitiveness and their pricing when it comes to trading with the US. If pricing models become unworkable, that will impact strategy, which could need surgical adjustments to function normally again. 
• One of the toughest decisions EU corporate leaders will have to face is how the tariffs affect their workforce. Crunching numbers could make it supremely obvious that a company can’t justify its current workforce size or hiring plans any longer. This is what a lot of European commentators are focusing on because, in the long term, it could lead to job losses unless companies can find other markets to balance out their growth strategies. 
• For many EU companies, these are uncharted waters. That’s why they will also need to decide if they have the right expertise at the leadership level – people with solid experience in risk, scenario planning and geopolitical expertise. This could help significantly among executives and in boardrooms. 

Leaders on both sides of this trade deal will continue to face uncertainty. That’s the new hallmark of transatlantic relationships. 

Donald Trump’s diplomatic style remains unpredictable, and he has shown on multiple occasions that he’s just as willing to threaten close allies as he is countries the US considers hostile. 

This will cast a lingering shadow over any predictability. As the trade deal sets in, any indication that it’s not meeting Trump’s standards, or that the EU can’t continue playing by its rules, will require more time, negotiation and spell a continued threat of higher tariffs. 

Think back to the days of the deal-or-no-deal Brexit question and imagine that on a transatlantic scale. 

The answer is scenario planning. Many boards will have started this already, accepting that it’s the new normal. If you haven’t, now is the time to do so: a relative calm after a stormy few months. It’s better to have a plan in place if the winds pick up again.

The boardroom agenda has changed because of this trade deal. The big questions lie in how companies are going to stay profitable with their current pricing model and supply chains, as well as their employment strategy and whether it needs to shift to make sense. 

Ultimately, the trade deal has delivered clarity, but not a lot of long-term certainty. The responsibility has now shifted to corporate leaders, who need to oversee any necessary recalibration to stay afloat.