EU-US Trade Disputes and Market Implications: Tariffs, Investments, and Financial Outlook

Ongoing Trade Negotiations and Key Disagreements

The European Union and the United States are facing significant hurdles in finalizing follow-up negotiations after agreeing to impose mutual tariffs of 15%. While the initial announcement on July 27 suggested progress, the lack of legal binding terms and conflicting interpretations on crucial details signal that the road ahead will be challenging and time-consuming.

According to the BBC, the primary disputes involve product-specific tariffs on pharmaceuticals, semiconductors, steel, and aluminum. Washington claims that European pharmaceuticals and semiconductors are now subject to a 15% tariff, whereas the EU insists that the current 0% rate will remain in place until a comprehensive new tariff structure is agreed upon. Similarly, the US plans to maintain a 50% tariff on steel and aluminum, but the EU expects a gradual reduction and the implementation of a quota system allowing partial duty-free imports.

Conflicting Investment Commitments

Investment pledges have also become a sticking point. The US asserts that the EU will purchase $750 billion worth of American oil, liquefied natural gas (LNG), and nuclear energy. The EU, however, has only expressed a willingness to consider such purchases, falling short of a concrete commitment. A similar gap exists regarding US claims that the EU will invest $600 billion during President Trump’s term, while the EU merely notes that companies have shown interest in US-based projects.

The BBC highlights that the EU cannot compel private companies to invest in the US, casting doubt on whether these ambitious investment targets can be achieved. Furthermore, concerns remain about whether the US can supply the energy volumes promised and whether the EU could intervene in procurement decisions typically left to private enterprises.

Defense and Wine Tariffs Under Scrutiny

Discrepancies are also evident in defense procurement discussions. While the US claims that the EU agreed to purchase significant quantities of American military equipment, the EU has not confirmed this. Given that nearly 80% of current EU defense investments are already directed toward US weapons, experts in Europe argue that expanding these purchases further would be impractical.

The US also plans to impose a 15% tariff on European wines and spirits, which the EU is seeking to reduce through continued negotiations. These issues, combined with growing dissatisfaction among EU member states, indicate that trade talks could drag on for months.

Impact on US Financial Markets

Despite ongoing trade disputes, the Trump administration’s success in concluding tariff agreements with several key partners—including Japan, the EU, and South Korea—has fueled optimism on Wall Street. The US financial markets, which have global significance, are responding positively to these developments.

On July 31, the S&P 500 briefly hit an all-time high before closing slightly lower due to profit-taking and reactions to Trump’s executive order on drug pricing. This performance defies common expectations that tariffs would raise consumer prices and slow economic growth. Year-to-date, the Nasdaq has climbed 9.59%, and the S&P 500 is up 8.42%, outperforming Japan (Nikkei 4.48%) and France (CAC 40 6.07%), while nearly matching the UK’s FTSE 100 (11.15%).

Economic Strength and Consumer Resilience

The US economy continues to show resilience, supported by low unemployment, stable inflation, and robust corporate earnings. The Federal Reserve maintains relatively high interest rates compared to other major economies, giving it more flexibility to respond to potential slowdowns. Analysts note that even if tariffs increase consumer goods prices, strong domestic consumption may offset the negative effects.

US household and corporate debt levels remain under 80%, below the OECD average of 80–95%, while the economy is expected to grow by 3% annually in the second quarter of 2025—the highest among developed nations. Moreover, a high proportion of US household wealth is tied to the stock market, meaning that rising equity values directly boost consumer confidence and spending power.

Outlook for the S&P 500 and Future Investments

Investment banks project that the S&P 500 could reach 6,500–7,000 by the end of the year, suggesting up to 10% further growth. Much of this optimism is tied to the execution of large-scale investments and purchase commitments pledged by Japan, the EU, and South Korea, totaling $1.5 trillion. Even partial fulfillment of these promises could provide a substantial boost to the US economy, particularly in sectors like artificial intelligence, semiconductors, and energy.

The expected inflow of capital into US Treasury bonds and equities, alongside the growth of dollar-backed stablecoins, could reduce government borrowing costs while increasing household financial assets. A strong dollar might also help offset inflationary pressures from tariffs.

Expert Analysis

Lee Jae-wook, senior portfolio manager at AllianceBernstein, remarked during a July 30 briefing in Seoul that while S&P 500 valuations are near historical highs, expected returns also remain strong compared to other markets. He noted that Europe and China, despite having lower valuations, currently offer much weaker profitability compared to the US.

In summary, while EU-US trade negotiations remain tense and unresolved, the US continues to enjoy short-term economic and market advantages. The combination of strong domestic fundamentals, substantial foreign investment pledges, and resilient consumer demand suggests that the American economy and stock market may continue to outperform despite ongoing tariff disputes.