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EU-US tariff deal on brink of collapse amid internal conflict and confusion

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As reactions from the continent rise against the tariff agreement reached by EU representatives with the US, the European Commission has claimed that the “agreement is not legally binding.”

According to a statement released by the Commission on Tuesday, the agreement is a “political understanding” that is “not legally binding.”

Indeed, Washington and Brussels have also published their own versions of the tariff agreement’s content, and these versions contain significant differences on important issues.

On the other hand, it is undisputed that the agreement stipulates a 15% tariff on most exports from the EU to the US, while the US will have tariff-free access to the EU market.

On Monday, French government officials stated that the agreement signifies the EU’s “submission” to the US. Paris argued that if the EU wants to maintain its claim as an “economic power,” the agreement should not be accepted without resistance.

The agreement was supported by the German government as it considered the interests of the German automotive industry. The industry is in a deep crisis and cannot afford to take risks in the crucial US market.

A “defensive” negotiation strategy was systematically supported by the German government. France, for example, had advocated for a more confrontational approach from the beginning, demanding the implementation of counter-tariffs and threatening harsh measures against US technology companies in Europe.

Germany, however, favored de-escalation. During a meeting with German business representatives in early June, Chancellor Friedrich Merz reportedly said that during his White House visit, he “explained the trade flows to Trump.”

Merz noted that the number of vehicles German car manufacturers export to the US is the same as the number of vehicles Germany imports from the US.

On the other hand, Merz only agreed to adopt a slightly tougher stance during his meeting with French President Emmanuel Macron in the middle of last week; however, it is said that at that point, he had “long known the content of the agreement.”

Contradictory statements from Brussels and Washington

Yesterday (Tuesday, July 29), concerns began to emerge that the agreement could genuinely collapse at the last minute.

Washington claimed that von der Leyen had made crucial concessions on issues like food standards and digital topics, while the EU categorically denied this.

Furthermore, the Commission announced that “the political agreement of July 27, 2025, is not legally binding” and that new negotiations would take place in the near future.

For example, the Commission stated that Washington had committed to establishing a “quota system” for steel and aluminum, under which a limited amount of metal would fall below Donald Trump’s 50% tariff.

However, the White House’s fact sheet denied this claim, stating, “Sectoral tariffs on steel, aluminum, and copper will not change… The EU will continue to pay 50%, and the parties will discuss securing the supply chains for these products.”

Under pressure over this contradiction, EU trade spokesperson Olof Gill directed journalists to the Commission’s press release. This statement, however, says the opposite: “The EU and the US will lower tariff rates on EU exports to historic levels, eliminating the current 50% tariffs.”

There is also confusion regarding pharmaceuticals. Gill said the EU believes its pharmaceutical exports will be subject to only a 15% tariff after the US completes its Section 232 investigation in the coming weeks. But the US statement made no mention of any delay in the investigation.

Gill said all issues would be clarified in a joint US-EU statement and that the bloc “hopes this statement will be published very soon.”

Still, Brussels appears to be preparing for the worst. The Commission announced it would not withdraw its €93 billion retaliation package against US goods until a joint statement is reached.

The measures, covering aircraft, automobiles, and food products, are set to take effect on August 7, giving negotiators a very short time to prevent a conflict.

Germany capitulated to the US due to the crisis in its automotive sector

According to German Foreign Policy, Germany’s stance was based on the interests of the German automotive industry, which is in a deep crisis. One of the most significant reasons for this crisis is the delay in transitioning to electric cars and the loss of its once-leading share in the important Chinese market.

For example, in the spring, Mercedes and BMW reported significant declines in sales and profits; in the first quarter, sales decreased by 7% and 7.8% respectively, while profits fell by 43% and 26.4% respectively.

Volkswagen announced last week that despite relatively stable sales, its profit for the first half of 2025 fell by more than 38%, marking the third consecutive half-year of decline.

Comprehensive layoffs have been planned for a long time. At VW, the main brand of the Volkswagen Group, nearly a quarter of the 130,000-strong workforce will be laid off by 2030.

Audi plans to reduce its workforce in Germany by approximately 7,500 by the end of 2029. According to reports, Mercedes is also considering laying off up to 20,000 people.

Automotive supplier ZF plans to lay off up to 14,000 people by the end of 2028.

The automotive sector is dependent on exports

In this situation, the German government has made stabilizing the German automotive industry a priority.

The sector is heavily dependent on exports: last year, 78.2% of all passenger cars produced in Germany (over 3.18 million vehicles) were sold abroad.

However, German manufacturers have faced some serious setbacks in recent years. For example, car exports to the United Kingdom, once the largest buyer of German vehicles, have decreased after Brexit due to the EU imposing retaliatory measures on the country.

While German manufacturers sold 593,000 cars to the United Kingdom in 2019, this figure dropped to just 390,000 in 2024.

Exports to China fell by about 17% last year; in the first five months of 2025, exports of cars and car parts to China decreased by approximately 36%.

The reason for this is the increasing purchase of domestic brand electric cars in China. The German industry cannot afford further declines in the US, its largest sales market, where 448,000 cars were sold from Germany in 2024.

In the first half of 2025, VW lost €1.3 billion to avoid passing on the 27.5% tariffs to its US customers and to not lose its market share in the US.

The German automotive lobby is still worried

Accordingly, the German automotive industry, in particular, had lobbied against imposing tariffs on the US.

On one hand, it was argued that Trump should not be encouraged to increase US tariffs under any circumstances, as this could have devastating consequences for the German industry.

On the other hand, Hildegard Müller, President of the German Association of the Automotive Industry (VDA), stated that tariffs against imports from the US would also affect cars produced in the US facilities of German automotive companies and exported from there to the EU.

These numbers are not insignificant: “About two-thirds of car exports from the US to the EU come from German manufacturers,” says Müller.

According to Müller, any counter-tariff imposed by the EU on automotive products from the US would have cost German manufacturers about €100 million per year for every 1% of the tariff.

Berlin-Paris tensions surface

When Merz took this pressure into account, serious disagreements with France began.

French Prime Minister François Bayrou said on Monday that the agreement, which was also “unsuccessfully” negotiated by the European Commission, meant the EU’s “submission” to the US.

Similar statements came from government and opposition members in Paris. Foreign Trade Minister Laurent Saint-Martin went a step further on Monday, stating that he was strongly opposed to leaving the outcome of the negotiations as it is, otherwise the EU could no longer be considered an “economic” power, and added, “The final word has not yet been spoken.”

The trend of German industry moving to the US could strengthen

Claims are becoming increasingly widespread that the tariff agreement, approved by Berlin on Sunday to support the German automotive industry, will encourage the relocation of car factories from Germany to the US.

According to automotive expert Ferdinand Dudenhöffer from the Center Automotive Research, if the agreement is implemented, it could be more profitable to produce high-volume models like the Mercedes E-Class or BMW 5 Series in the US rather than in Germany.

This is because, according to the rules agreed upon by von der Leyen and Trump, no tariffs will be paid on exports from the US to Europe.

If Mercedes and BMW centralize the production of these models in the US, they could supply both sides tariff-free from a single location, which would be logical and profitable for the companies.

Diplomacy

US formally redesignates Hezbollah as Iranian proxy under sanctions

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The US has officially changed its designation of Hezbollah to identify it as a “proxy of Iran”.

Executive Order 13224 now explicitly states that Hezbollah is sanctioned for acting for or on behalf of Iran’s Islamic Revolutionary Guard Corps-Quds Force (IRGC-QF).

Speaking to Al Arabiya, a US State Department official argued that this change underscores how Hezbollah operates with almost no regard for Lebanese sovereignty, the Lebanese people, or the Lebanese state.

The official continued:

“This decision formally recognizes that Hezbollah’s military operations, external security apparatus, and major financing networks function as an extension of the IRGC-QF—Iran’s primary instrument for executing terrorist activity beyond its borders. Hezbollah is not a Lebanese resistance movement.”

Pointing to repeated oaths of loyalty and allegiance by Hezbollah officials to Iran’s Supreme Leader, the official maintained that the Quds Force also exerts a decisive influence over the group’s military and strategic decisions.

The official stated that Washington remains committed to “disrupting the networks that allow Iran to use Hezbollah as an instrument to undermine Lebanese sovereignty, threaten regional stability, and advance Tehran’s terrorist agenda.”

The official further accused Hezbollah of dragging Lebanon into destructive wars with Israel twice within the last two years, stating that the group remains an obstacle to Lebanon’s sovereignty, stability, and economic recovery.

“The disarmament and dismantling of Hezbollah is vital for any credible path forward for Lebanon, and we are working with our partners to advance this goal,” the US State Department official said.

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Prof. Doster rules out direct Türkiye-Israel war despite Syria tensions

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Assessing the escalating friction across the Middle East, Marmara University Faculty Member Prof. Dr. Barış Doster shared comprehensive geopolitical evaluations in an interview conducted by international relations scholar Dr. Elif İlhamoğlu on the Harici digital broadcast programme. The discussion focused on Israel’s recent strikes on the Abu al-Zuhur airbase in northern Syria, proposals for tripartite security mechanisms, regional defence agreements, and the confrontation involving the US, Israel, and Iran.

“Türkiye and Israel will not clash directly”

Opening the broadcast, Dr. Elif İlhamoğlu Akkoç recalled that Israel’s air assault targeting the Abu al-Zuhur military airbase in Idlib, northern Syria, had generated extensive international condemnation. The strikes drew severe reactions across Türkiye and Gulf states, as well as critical statements from US Special Envoy for Syria and Ambassador to Ankara Tom Barrack. The airbase, situated approximately 70 kilometres east of the Turkish border, had reportedly remained out of operational service since 2013. Following the attack, Israeli Prime Minister Benjamin Netanyahu acknowledged responsibility while explicitly citing Türkiye’s military footprint in Syria among the justifications for the operation, bringing Ankara and West Jerusalem into renewed indirect confrontation.

Asked whether this indirect friction could transform into an active military conflict, Prof. Dr. Barış Doster dismissed the prospect of direct hostilities between Ankara and West Jerusalem. Doster stated: “I do not anticipate any physical contact, hot conflict, or direct military confrontation between the two countries. When one evaluates the historical ties, political bonds, diplomatic relations, and commercial links between both states, alongside their separate, overarching strategic engagements with the US, Türkiye and Israel will not clash directly.”

Emphasising the underlying dynamics of this bilateral dynamic, Doster explained that competition would persist through unconventional channels: “This rivalry will continue sharply across various regional theatres through indirect instruments and proxy forces. We are all well aware of the support Israel has extended to the PKK, PYD, and YPG terror groups for years, which it continues to maintain today.”

“Israel wants to see Syria divided into four parts”

Addressing Israel’s broader regional operations, Prof. Dr. Barış Doster noted that West Jerusalem’s aggressive posture is backed by major Western powers. Doster remarked: “Israel, which is committing genocide, ethnic cleansing, and barbaric acts in Gaza while showing absolute disregard for international law, the laws of war, and the legal frameworks governing armed conflict, enjoys the unlimited, unconditional, and frictionless backing of the US and Europe’s leading trio: France, Germany, and the UK. This audacity and aggressiveness are not new. We know what happened in Gaza; we know what happened in Palestine; and we are familiar with the actions taken alongside the US against Iran in the recent past.”

Underlining the limitations of international rhetoric, Doster stated: “We must and do register the strongest possible reaction against these moves. Yet we should not express astonishment. Israeli tanks have previously advanced to within 20 kilometres of Damascus. United Nations resolutions have repeatedly affirmed that the Golan Heights constitute sovereign Syrian territory. Nonetheless, Israel acts as an occupying and annexing force. During his initial presidential term, Donald Trump formally recognised this annexation. Following Israel’s declaration of Jerusalem as its capital, Washington relocated its diplomatic mission there, defying objections from Türkiye and the broader Islamic world. Past American presidents had avoided putting that relocation into practical effect, but Trump brushed those reservations aside. During all these developments, did a single deterrent measure or concrete sanction emerge from the Islamic or Arab worlds beyond verbal condemnation? No. Therefore, while vocal opposition is imperative, we must recognise that verbal condemnations lack deterrence against Israel.”

Doster linked the recent strikes in northern Syria directly to West Jerusalem’s long-term strategic objectives for the Syrian state: “From the beginning, Israel has explicitly sought a Syria partitioned into four distinct entities: Kurds, Arabs, Alawites, and Druze. Israel serves as the primary patron and backer of two of these groups: the Kurds and the Druze. When the PKK, PYD, and YPG terrorist apparatus was heavily battered on the ground by the Damascus administration in recent months, it was rescued directly by the US and Israel. While Washington and West Jerusalem did not grant the group everything it sought, they prevented its complete liquidation. They confined it to a smaller geographic pocket, preserved its political, military, administrative, and resource footprint, and kept it in reserve for future operational needs. Thus, responding to Israeli aggression is necessary, but being surprised by it is entirely unwarranted.”

“How can you establish a red telephone line with Israel?”

Responding to remarks by US envoy Tom Barrack—who argued after the Idlib strikes that a permanent security dialogue and cooperation mechanism should be established among Türkiye, Syria, and Israel—Prof. Dr. Barış Doster characterised such an architecture as entirely unviable under current geopolitical conditions. Doster asserted: “Such a mechanism is unequivocally impossible. First, Israel openly seeks the partition of Syria. Second, the degree of control and long-term durability of the Damascus administration remains uncertain. Although the current Syrian leadership receives support from Arab capitals and Ankara, American officials themselves concede that lasting stability in Damascus is far from guaranteed, even raising the prospect of coup attempts against Ahmed al-Sharaa.”

Evaluating the regional power balance in Damascus, Doster continued: “The influence of the US and Israel over Syria has peaked over the past two years. Ahmed al-Sharaa does not claim rights over the Golan Heights and has offered assurances to Washington that Damascus will not present a security threat to Israel, promising to restrain any attempts by Iran, Hamas, or Lebanese Hezbollah to do so. Concurrently, the historical clout of Iran and Russia in Syria has plummeted toward near-total marginalisation, with Moscow’s functional influence waning even within its military bases. Under circumstances where Israel does not take the Syrian administration seriously and actively seeks its partition, how can you establish a red telephone line or a trilateral security architecture? Furthermore, as long as profound political competition persists and Israeli military violence continues, establishing a functional crisis hotline or security mechanism between Türkiye and Israel is equally unattainable.”

Addressing Tom Barrack’s earlier diplomatic proposals promoting an energy and security corridor connecting the Caspian Sea to the Eastern Mediterranean via Türkiye and Israel, Doster dismissed the initiative as strategically unrealistic: “We will not allow Tom Barrack to insult our intelligence. A corridor of that nature is envisioned primarily between Türkiye, Azerbaijan, and Israel. Ankara and Baku share exceptional historical, cultural, economic, and strategic links under the framework of ‘one nation, two states’. However, having completed my doctoral dissertation on the Caucasus, Eurasia, and the Turkic world, I state emphatically that relations between Israel and Azerbaijan are no less deep, intensive, or comprehensive than relations between Türkiye and Azerbaijan.”

Doster observed that broader systemic opposition would block such an axis: “Regardless of how strong Baku’s ties with Tel Aviv and Ankara are, establishing this line is exceptionally difficult. At the regional level, actors such as Iran will fundamentally object. Globally, because such an axis seeks to sever China’s long-standing, capital-intensive Belt and Road initiative, Beijing will actively oppose it behind the lines. Finally, Moscow will vigorously resist any configuration that expands American strategic hegemony across the Caucasus and the Eastern Mediterranean.”

“When needs change, alliances change”

Evaluating the trilateral Mecca Agreement concluded between Saudi Arabia, Türkiye, and Pakistan—which contains collective defence clauses compared by Turkish Foreign Minister Hakan Fidan to NATO’s Article 5—Prof. Dr. Barış Doster analysed the functional foundations of the pact. Doster remarked: “As I frequently observe, when needs change, alliances change, and every alliance inevitably generates an opposing counter-alliance.”

Interrogating the strategic rationale of the pact, Doster asked: “Against whom was this alliance formed? Was it created against the Houthis? Was it directed at India, Pakistan’s primary adversary? Was it designed to counter the US, or perhaps Qatar, given Riyadh’s fluctuating ties with Doha and Abu Dhabi? In reality, this alliance is positioned squarely against Iran. An alliance that implicitly targets Iran raises critical questions regarding its durability and its potential to deepen fragmentation across the Islamic world. The pact brings together Sunni Arab leadership represented by Saudi Arabia alongside two major non-Arab powers, Türkiye and Pakistan. Saudi Arabia possesses vast capital reserves and leads the Arab world alongside Egypt; Türkiye represents the pre-eminent military power in the Turkic sphere; and Pakistan is a nuclear-armed state maintaining operational energy cooperation and historically balanced ties with Tehran despite its existential rivalry with India over Kashmir.”

Doster elaborated on the structural vulnerabilities of the arrangement: “To attain institutional permanence, an alliance must be grounded in shared political values, compatible state regimes, uniform threat perceptions, and unified strategic interests. None of these elements align across these three states. While Riyadh views Tehran as an existential threat, Ankara maintains a historical, calibrated rivalry with Iran and does not define it as a mortal enemy. Similarly, Islamabad does not perceive Tehran as an existential peril. Therefore, whether this pact represents a premature birth or a stillborn initiative remains an open debate, but its anti-Iranian orientation is unmistakable.”

Noting the geopolitical reactions to the pact, Doster observed: “This formation inherently pleases Washington, which has already extended its formal congratulations. Despite Türkiye’s participation, it also serves Israeli strategic interests by containing Iran, even if West Jerusalem approaches Ankara’s inclusion with tactical caution. Despite the media commentary surrounding the Mecca Agreement, history shows that such ad-hoc initiatives rarely achieve enduring operational deterrence. The 57-member Organisation of Islamic Cooperation and the 22-member Arab League—originally founded in response to Israeli expansionism in Palestine—have demonstrated virtually no concrete effectiveness. Without a clearly defined architecture of shared threats and mutual strategic goals, this pact will be perceived across the region exclusively as an anti-Shia, anti-Persian alignment. Even if Iran’s regional resistance axis has experienced severe attrition, Tehran’s demographic and geopolitical weight ensures that a exclusionary pact of this nature cannot achieve long-term viability.”

Commenting on proposals to incorporate Egypt or Iran into the mechanism, Doster described the inclusion of Tehran as strategically impossible: “Inviting Iran into this pact would be equivalent to the Shanghai Cooperation Organisation offering membership to the US, or Washington inviting Russia to join NATO. Regarding Egypt, Saudi Arabia’s strategic agenda includes structural competition with Cairo. Despite Egypt’s severe economic vulnerabilities, its historical, political, and cultural gravitas within the Arab world means that Riyadh will not endorse Egyptian entry, as it would dilute Saudi primacy within the bloc regardless of Turkish diplomatic lobbying.”

“The US and Israel will not launch a wide air campaign”

Turning to the confrontation between the US, Israel, and Iran following the expiration of ceasefire understandings, Prof. Dr. Barış Doster assessed the military balance and the leadership posture of Donald Trump. Doster remarked: “By completely discarding classical diplomatic protocols, Trump has proven himself an unpredictable and unreliable political actor. One need only recall the assurances given during the NATO summit regarding CAATSA sanctions, the delivery of F-35 fighter aircraft, and engine procurement for Türkiye’s national combat aircraft KAAN. When dealing with an actor whose positions shift constantly, long-range diplomatic projections become exceedingly difficult.”

Analysing the battlefield dynamic between Washington, West Jerusalem, and Tehran, Doster concluded: “Despite sustaining severe losses across its administrative, military, and command cadres due to American and Israeli strikes, Iran currently maintains psychological ascendancy within its domestic public and broader international opinion. It is evident that the US administration has failed to secure its primary objectives through coercive rhetoric. Moving forward, the US and Israel will not launch a wide air campaign characterised by relentless, high-intensity strategic bombing. A ground offensive remains entirely out of the question, as I have maintained from the outset. While localised, low-intensity air strikes against specific Iranian targets may occur, a protracted, maximum-scale aerial assault conducted jointly by the US and Israel remains improbable.”

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UK plans targeted sanctions on Israel over West Bank settlement bids

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British Foreign Secretary Ed Miliband has said the government will prepare “new, targeted sanctions” against Israelis involved in “illegal settlement expansion” in Gaza and the West Bank.

In a statement issued on Wednesday night (19 August), Miliband stated that following the Israeli government’s opening of tenders for the construction of 1,200 settlement homes in the strategically vital E1 area of the West Bank, the United Kingdom would not “stand back and accept the destruction of the two-state solution”.

“The E1 area will run straight through the heart of Palestine and risks cutting off the West Bank from East Jerusalem; this would jeopardise the viability of a two-state solution,” Miliband said, describing the Israeli government’s actions as “unacceptable and destructive”.

The British minister called on his Israeli counterpart, Gideon Sa’ar, to “halt the E1 plans immediately” and withdraw the tender.

Miliband also stated that he had summoned Charge d’Affaires Daniela Grudsky Ekstein, the country’s top diplomat in the UK, to the Foreign Office to convey these demands clearly.

Miliband said the UK would announce a “comprehensive range of measures in the coming weeks in response to the policies of the Israeli government”.

These measures underscore a harder line taken by the UK against Benjamin Netanyahu’s government under the new Prime Minister, Andy Burnham.

This shift in stance was evident even before Burnham officially became prime minister. Burnham apologised for the Labour Party’s previous position on Israel’s military campaign in Gaza under his predecessor, Keir Starmer, saying the party “had not got it right”.

Last month, the UK’s new Defence Secretary, Wes Streeting, stated that Israel was not “complying” with international standards in Gaza and the West Bank.

Other European allies have also hardened their stance towards Israel. Earlier on Wednesday, German Chancellor Friedrich Merz strongly condemned remarks by National Security Minister Itamar Ben Gvir, who called for nighttime assassinations in Gaza.

Israel, for its part, reacted against the London administration. Foreign Minister Sa’ar said: “The Jewish people have the right to live everywhere in the Land of Israel, just as the British have the right to live in London and throughout the UK.”

Maintaining that the British-issued 1917 Balfour Declaration “officially recognised the historic right of the Jewish people to re-establish their national homeland in the Land of Israel—including the area in question”, the minister pointed out that Britain still controlled colonial territories thousands of kilometres from its own shores.

Arguing that it was absurd for Britain to “lecture the Jewish people on where they can live in their historic and tiny homeland”, Sa’ar said the British Foreign Secretary’s statement condemned Israel while “turning a blind eye to Palestinian terrorism, incitement, and the Palestinian Authority’s ongoing financial support for terror—namely the ‘pay to slay’ policy”.

Sa’ar concluded his statement:

“The UK Government’s systematic policy of blaming only Israel while ignoring Palestinian extremism has already contributed to an enormous wave of antisemitic hatred and attacks against the British Jewish community. Continuing on this path will only make matters worse.

The British Government’s decision to damage relations between our countries is deeply regrettable. But Israel will not be a passive victim of this policy.

Israel will defend its rights, its interests, and its people.”

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