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.