U.S.-EU Tariff Deal Boosts Euro and European Stock Futures while Analysts Aren’t Celebrating Yet

TradingKey - News of a U.S.-EU trade agreement on a 15% tariff rate lifted euro and European equity futures on Sunday, but analysts remain cautious. While the deal removes a major near-term risk, many warn that tariffs still pose a structural drag on long-term growth.

On July 27, the U.S. and European Union announced a new trade framework, including:

• A 15% tariff rate on EU exports to the U.S.
• A $600 billion EU investment pledge in the U.S.
• A commitment to purchase $750 billion in American energy products

However, disagreements remain over semiconductor and pharmaceutical tariffs, with U.S. officials stating these sectors are still under Section 232 national security review — leaving room for higher rates.

Market Reaction: Relief Rally Begins

On Monday, July 28, during Asian midday trading:

• Euro Stoxx 50 futures rose 1.0%
• DAX futures (Germany) up 0.96%
• CAC 40 futures (France) up 1.06%
• EUR/USD initially surged but pared gains, trading +0.07% at 1.17456

EUR/USD Exchange Rate, Source: TradingKey

Short-Term Relief, But Long-Term Risks Remain

Tellimer noted that the 15% rate has brought a much-needed sense of relief, especially for investors in European manufacturing.

As European Commission President Ursula von der Leyen stated, the deal brings “stability” and “predictability” — something markets have desperately needed.

Cité Gestion analysts added that the agreement delivers what equities crave most: visibility. With the risk of a full-blown transatlantic trade war fading, investors can now breathe easier — and resume risk-taking.

The deal is particularly positive for European automakers and suppliers, including Stellantis, Volkswagen, BMW, Mercedes-Benz and Valeo.

These companies had faced significant downside risk from potential 30% tariffs. Now, that threat is off the table — at least for now.

Year-to-date, the Stoxx 600 Automobiles & Parts (SXAP) index has risen just 0.16%, far behind the broader Stoxx 600’s 7.69% gain — suggesting room for catch-up.

But Don’t Celebrate Yet

Despite the optimism, analysts urge caution.

With 15% tariffs still in place — and key details on semiconductors and medicines unresolved — the market may see a short-term bounce followed by renewed pressure.

“The devil is in the details,” said one strategist. “We could see markets rally in the morning, only to sell off again by afternoon.”

Cherry Lane Investments, a family office, warned that while the deal resembles the recent U.S.-Japan agreement, a hard truth remains: Higher tariffs mean higher inflation — and it all depends on how much of that cost is absorbed by manufacturers versus passed on to consumers.

Amundi Asset Management, Europe’s largest asset manager, believes the continent’s economy will remain subdued in the long run.