Trump shakes down the EU

Key Markets report for Monday, July 28, 2025

One of these two looks properly soaked.

In this report dated 14 May 2025 (“Fear of Trump grips the Eurozone”), I explored the extraordinary power that the US have over the EU:

“it is not difficult to appreciate the power which the US administration holds over the EU's future, its economy and its financial system. For decades, Europe could count on almost unconditional support from the US. Under Trump, this support is evidently no longer taken for granted … From what we have seen, Trump and his cabinet appear to be outright irritated with their EU ‘allies’... And as if that weren’t bad enough, the EU and the ECB have been cursed with incompetent leadership like nobody’s ever seen…”

Yesterday, President Trump made good use of his bargaining chips and forced the European Commission’s incompetent queen of corruption, Usrula von der Leyen to accept the trade deal Trump proposed and described as, “the biggest deal ever made.” To add insult to injury, the trade negotiations were concluded on Trump’s own private home turf in Scotland which features the greatest golf course ever built in the Milky Way galaxy.

It was a shakedown

The key provisions of the concluded deal read like an embarrassing shakedown of the EU:

• the EU agrees to purchase $750 billion in US energy exports, plus a “vast amount” of military equipment

• the EU agrees to invest an additional $600 billion in the US economy

• the EU agrees to open all of the member nations’ markets to zero tariff trade with the US

• the US will charge a 15% baseline tariff on all EU-produced goods coming to the US, including cars

Given the huge negotiating power imbalance between the US and Europe, the deal should not have come as a surprise and the two leaders’ body language said it all. Von der Leyen looked clearly unhappy even though she tried to conceal her defeat behind a brave face:

“… it's a good deal. It's a huge deal. Was tough negotiations. I knew it at the beginning, and it was indeed very tough, but we came to a good conclusion from both sides.”

For an illegitimate political leader, she couldn’t well concede that she got mauled by Trump and that as a result of her inept leadership the EU will suffer further deindustrialization, stagflation, austerity and impoverishment. The Eurocrats were clearly hoping for a better deal, but got outmaneuvered by Trump. When the UK agreed to a 10% baseline tariff on US exports back in May, the arrogant Eurocrats felt confident that they would do better. They imagined that they could force Trump to accept a "zero-for-zero" tariff pact, but that was not to be.

Then again, there’s no evidence that Von der Leyen cares, or ever did care about any of that. Her despondence might only have been due to her being unable to collect her customary cut on such a “huge deal,” which makes the whole shakedown personal for her.

Weakening the already weak EU

The consequences of the deal will certainly be very adverse to the EU. Ms. von der Leyen has nearly spent her great ReArm Europe initiative which she pompously announced on 4 March 2025. Paying 15% baseline tariffs on exports to the US and opening the EU markets to zero tariff imports from the US will be a very heavy blow to the competitiveness of EU industries and will create a massive incentive for them to move their operations to the US, Mexico, or to China.

It’s hard not to feel contempt for Von der Leyen and the whole EU who never tired of parading their exaggerated sense of self-importance in all occasions, and who happily cooperated with the US and UK deep state in cutting off their energy lifeline from Russia while braying importantly about “our unity” in the face of Russian aggression.

For once however, the markets seem to have read the writing on the wall correctly. The euro, which rallied nearly 15% against the US dollar since Trump’s inauguration in January is trading nearly 0.6% lower in today’s trading session, below 1.17 USD/EUR. More ominously, if it drops below 1.16, it will have formed a significant double-top reversal pattern, suggesting that a more significant reversal could be on the cards.

It’s hard to see what just happened at Turnberry, the world’s greatest golf course, as anything but an embarrassing but appropriate dressdown of the pompous, pretentious, warmongering European Union.

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Today’s trading signals

With Friday’s closing prices we have the following changes for the Key Markets portfolio: