During a round of golf at his golf course in Turnberry, Scotland, featuring GBP 1,000 tee-up fees, US President Donald Trump was observed cheating. After Trump lost his ball, a caddy can be seen secretly dropping a new ball in a favorable position.

Golf isn’t the only thing Trump is known to cheat at. Monday’s newspaper headlines suggest the EU got the short end of the stick in the newly announced trade deal with the US. Absent from most commentary is the fact that the importing country pays tariffs, and therefore a tax on its citizens. Let’s dive in.

Terms of the Deal

The US will apply a flat 15% tariff on most EU exports, including automobiles, machinery and pharmaceuticals. That’s down from a threatened 30–50% but still a sharp shift from prior near-zero rates. Critical items — such as aircraft components, semiconductors and essential medicines — fall under “zero-for-zero” terms with no mutual tariffs. Existing 50% US tariffs on steel and aluminum remain in place for now, with a vague promise of moving to quotas later. 

European Commitments

The EU agreed to buy $750 billion in US energy — primarily Liquified Natural Gas (LNG), oil and nuclear — by the end of 2028. That translates to roughly $250 billion annually through 2027, far above current levels. EU firms pledged $600 billion of new investment into the US economy, aimed at manufacturing, energy infrastructure and defense. Though not precisely quantified, the EU committed to significantly increasing purchases of US-made defense systems and aerospace technologies.

Who pays tariffs?

Tariffs are levied and paid by the importing country. In the case of the EU-US deal, custom dues will have to be paid by US importers (not EU exporters). Tariffs are already causing havoc for US businesses, as witnessed in recent surveys of purchasing managers.

According to monthly statements from the US Treasury, monthly revenue from customs duties increased from $8 billion to $26 billion in recent months. Annualized, the amount could reach $300 billion or more. 

For products with low value-added that are easily replaceable, the EU exporter will likely face the choice between lowering the price or foregoing US sales. High value-added products not available from US manufacturers, however, could see customs duties passed on to US customers. 

The top three EU-made imports to the US are nuclear reactors, machinery and cars. Nuclear reactors are, naturally, a lumpy business, but unlikely to be easily replaceable. 

Bertram Kawlath, President of German Verband Deutscher Maschinen- und Anlagenbau (VDMA) — Mechanical Engineering Industry Association, representing over 3,000 mostly German and European engineering companies — described the deal as a “regrettable development”. He also pointed out how “every US production company depends on imports of European machinery equipment — and this will remain the case going forward”.

An earlier story by the Wall Street Journal described how US producers of canned foods, like Campbell, Hormel and Del Monte, are getting squeezed by rising steel tariffs. A recent analysis by the same publication found that the price of a can of Campbell’s “New England Clam Chowder” increased by 30% since the beginning of the year.

Data published by the US Bureau of Statistics showed that furniture prices rose at a three-month-annualized rate of 9% in June, the likely result of tariff pass-on, as the US imports roughly one third of furniture sold.

German car industry in uproar

“The US tariff rate of 15%, including for automotive products, will cost German automotive companies billions annually,” according to Verband der Automobilindustrie (VDA) — German Automotive Industry Association — President Hildegard Müller. German automakers were already struggling with the transformation to electric vehicles and increased competition from China. 

German car manufacturers are unlikely to lower prices in the US as they are already around 30% below home market levels. A 12% decline in the value of the dollar since the beginning of the year did not help either, reducing revenue and profit per car in Euros. 

Audi recently lowered its 2025 sales and profit guidance, citing the impact of US tariffs and restructuring costs. General Motors reported a $1.1 billion hit to profitability from tariffs in the second quarter of 2025.

Not all is lost

A car-buying expert I spoke to explained that car makers are “eating” tariff costs for now.  However, cost increases will be worked into the prices of new 2026 models coming out in late summer.

US car imports from the EU are dominated by German cars, led by premium brands like BMW, Mercedes, Audi and Porsche.  Industry sources reported that foreign car makers had already lowered price incentives (discounts) in May to combat tariff costs. Lower incentives equal higher sales prices for the customer.

The average sales price for a new BMW ($74,400) is 50% above the average US car price, indicating the customer base is less price-sensitive than the average buyer. Price increases are therefore likely to be easier for high-priced German brands than for US manufacturers. 

$750 billion energy shopping spree

According to the White House’s “fact sheet,” “the EU will purchase $750 billion in US energy”, consisting of oil, gas and nuclear fuel. The $750 billion is said to be spread over three years, or $250 billion per year. Currently, the EU imports around $65 billion of fossil fuels from the US. Thus, tripling or quadrupling imports from the US is required to reach said target.

The EU already imports around 50% of its LNG from the US, and 17% from Russia. Even completely replacing Russia’s share would increase US deliveries by only around one third. LNG has important capacity constraints. The exporting country needs liquefaction terminals, specialized LNG ships and regasification terminals in the importing country. 

Those terminals are huge, ugly and can cost $1-2 billion to build. How much coastline is there left in Europe where you could build such massive installations? Floating Storage Regasification Units (FSRUs) are a less expensive option, yet environmental concerns as well as lack of space might prevent deployment.

Assuming LNG imports from the US increased to $75 billion, crude oil imports would have to make up the gap, increasing fourfold to $175 billion. With oil trading at $66 a barrel, 2 billion additional barrels per year, or 5.6 million barrels per day (bpd), would be required. Where is that going to come from? 

US crude production is increasing by approximately 1 million bpd per year, with most of the increase stemming from “tight oil” (shale/fracking). Shale oil well production peaks after 8-12 months. Wells are 80-90% depleted after 2 years. Unless new holes are constantly drilled, production falls off quickly, as witnessed in the recent decline in the number of rigs. Shale production needs oil prices of at least $60-$70 to be profitable. At current prices, fewer new holes are being drilled, resulting in a decline in production. The $250 billion a year energy exports to the EU are therefore nothing but a pipe dream.

European efforts to wean off fossil fuels

Expectations of a European energy shopping spree ignore the ongoing efforts by European countries to wean themselves off fossil fuels. Following the Russian invasion of Ukraine, which led to an energy price shock, consumers are willing to switch to alternative energy supplies. 

In the first half of 2025, German installations of gas-fired heating systems fell by 41%, with oil-based heating systems declining by 80%. Meanwhile, sales of heat pumps surged by 55%. The Building Energy Act (GEG), often referred to as the “heating law,” was introduced in 2024 to ramp up the replacement of fossil heating with low-carbon technologies, including heat pumps.

$600 billion investment bonanza

The announced $600 billion in “new investments” in the US should be taken with a grain of salt, too. The US is hoping to sell “significant amounts of military equipment” to the EU.

However, JD Vance’s appearance at the Munich Security Conference shocked European attendees, bringing the conference host to tears. It was understood as the end of NATO. A rapprochement between Trump and Putin could see the US possibly taking Russia’s side in the Ukraine conflict, which would pit the US against Ukraine-supporting Western Europe.

Any military equipment of US origin became worthless overnight, since the US could remotely disable it, refuse to deliver spare parts or ammunition or scramble communication systems. The EU must now redevelop many weapon systems from scratch, making them “US-proof”. Hence, the €1 trillion spending plan in Germany (requiring an amendment to its constitution).

Off the record, European politicians and military leaders agree that NATO is dead. However, it would be unwise to say so publicly, as things could change in four years. The best strategy seems to be to pretend “everything is fine” while at the same time working on a “divorce”. It is highly questionable that under these circumstances, billions will be spent on potentially worthless US military equipment.

Big words, little substance and self-harm

In short, the announced “deal” is unlikely to live up to the fanfare with which it was announced. The targets seem unrealistic. In the end, the US consumer will likely have to bear the brunt of the cost, if only with a time lag. Tariffs are a cost borne by everyone, with the proceeds being used to finance tax cuts for the wealthy.

[Kaitlyn Diana edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.