‘Buy European’

EU-Mercosur Agreement

On the one hand, the European Union wants to implement the long-discussed free trade deal with Mercosur. It was officially sealed in December last year after negotiations that have lasted more than a quarter of a century.[1] However, it still needs to be ratified. European Commission President Ursula von der Leyen kick-started the ratification process on 3 September. It could still fail if a blocking minority of member states representing at least 35 per cent of the EU population were to reject the deal. And only recently this was considered likely. France in particular fears disadvantages for its agricultural businesses if the EU agricultural market opens up to agricultural products from Mercosur countries if the agreement comes into force. And there are other countries, such as Ireland, Austria and Italy, that share France’s concerns. However, under the shock of US tariffs imposed on large parts of the EU’s export economy, we are now seeing a rethink. Even the French government has reportedly signalled that it no longer intends to keep opposing the deal.[2] Ratification by the end of this year is now considered entirely feasible.

Main beneficiaries

Alongside the former colonial powers Spain and Portugal, which still maintain close economic ties with their former colonies, Germany is considered the main beneficiary from the agreement. Mercosur has so far imposed relatively high tariffs on goods from sectors in which Germany has traditionally been strong. These include cars (35 per cent), automotive parts (14 to 18 per cent) and machinery (14 to 20 per cent).[3] Abolishing high duties might enable annual savings of 400 to 500 million euros for German exporters. German producers also hope to increase market share. The problem for the Mercosur countries is that Europe’s export advance could be at the expense of local industry. They run the risk of being reduced once again to the role of raw material suppliers and mere sales markets for European countries. However, members of the South American trade bloc are also pushing harder than ever for a free trade agreement to come into force because they, too, have been hit hard by US tariffs and seek new markets for their raw materials. This is particularly true of Brazil, against which the Trump administration has adopted a vindictive stance and imposed tariffs of 50 per cent. At the same time, however the longstanding opposition remains. A new wave of protests against such a deal is re-emerging in Europe. The first demonstrations by angry French farmers took place last Friday.[4]

Deal with Indonesia

As for the free trade agreement with Indonesia, which Brussels and Jakarta signed off last Tuesday, there is also a problem of ratification. In the Indonesian case, negotiations have taken just under ten years. It provides for more than 90 per cent of all goods to be exempt from customs duties. Many will be immediately exempt upon the agreement coming into force. The rest, including Indonesian customs duties of 50 per cent on imported cars, will apply within five years.[5] The German automotive industry hopes to benefit from new export opportunities. Indonesia is also negotiating with car manufacturers from the EU on cooperation in the production of batteries and electric vehicles. As the world’s largest nickel producer, the country imposed a ban on the export of unprocessed nickel in 2020 in order to retain a larger share of the added value for its own economy. Jakarta is now promoting the establishment and expansion of production sites with European investment. China has clearly been the dominant producer in this field up to now.[6] Jakarta is also counting on the deal leading to expanding exports to Europe, particularly textiles where the emerging Indonesian textile industry fears a painful collapse of exports to the US due to Trump’s tariffs.

Alternatives to the US

The EU is also pushing ahead with work on further free trade deals with other countries in Southeast Asia. It is currently in talks with Thailand, Malaysia and the Philippines. Like Indonesia and the Mercosur countries, they are suffering from US tariff hikes and are keen on finding new export markets. EU Trade Commissioner Maroš Šefčovič has already stated that these three additional agreements will not be the last. Brussels explicitly regards them as a potential “building block” towards a comprehensive region-to-region free trade agreement with the entire ASEAN association.[7] Free trade agreements with Singapore and Vietnam are already in force.[8] In fact, the EU already began talks on a free trade agreement with the entire ASEAN group of countries back in 2007, but talks were suspended again in 2009. In addition to the countries mentioned above, ASEAN also includes Myanmar, Cambodia, Laos and Brunei. Furthermore, East Timor is expected to be officially accepted as the eleventh ASEAN member at the end of October.

50 per cent tariffs

Of course, economists do not expect that the hoped-for free trade deals with Mercosur, with the growing number of Southeast Asian countries and, in particular, with India, with whom EU negotiations are in full swing, will be sufficient to completely compensate for the US business losses. The damage to Europe’s economy results above all from collapsing exports of steel, aluminium and a long list of products containing steel and aluminium. The deal agreed by the European Commission with the United States sets tariffs at 50 per cent on these products. Calculations by the Cologne-based German Economic Institute (IW) indicate that 5.7 per cent of all exports from the EU to the United States will be affected, but as much as 8.8 per cent of all US-bound German exports.[9] Some of the export goods are, however, niche products for which US buyers would find it difficult to find substitutes, according to the IW analysis, meaning that US importers would have to pay the expensive tariffs out of their own pockets if suppliers in the EU could not offer large discounts. Nevertheless, dramatic losses are to be expected for existing exporters from Germany and the EU.

Arbitrariness instead of rules

In response, Brussels is preparing some concrete countermeasures. On the one hand, there is talk of setting its own tariffs on imports of aluminium, steel and products made from both metals. The European Commission could soon impose 25 to 50 per cent import duties on these goods.[10] However, this will expose Brussels to the risk of counter-countermeasures, especially tariffs on European exports. Given the current situation, such a tariff war would likely be aimed at China, for example. On the other hand, there is discussion of linking the awarding of public contracts to the goods manufactured in the EU. EU Industry Commissioner Stéphane Séjourné advocated this protectionist step back in May when she argued for a “Buy European” law.[11] According to a report in the Handelsblatt, the Commission intends to put forward the respective regulations shortly. The report says there will be a quota for green steel in government infrastructure projects. German Finance Minister Lars Klingbeil is also quoted as saying that the upcoming “investment in roads, bridges and railways” should only use “steel from European production” and this move is “now being planned”.[12] However, “Buy European” clauses of any kind would constitute a breach of WTO rules. Such EU “rebalancing” would mark a further step towards unconcealed arbitrariness in the global economy.

[1] See: Die neokoloniale Doppelrolle.

[2], [3] Hendrik Kafsack: Die Nagelprobe für den Freihandel. Frankfurter Allgemeine Zeitung 04.09.2025.

[4] UE-Mercosur : les agriculteurs en colère contre l’accord, la révolte paysanne gronde à Versailles. latribune.fr 27.09.2025.

[5] Sultan Anshori: Indonesia, EU seal trade deal, hope to offset Trump tariffs. reuters.com 23.09.2025.

[6] See: Das neokoloniale Modell der EU.

[7] EU advancing in trade agreement talks with Philippines, Thailand, Malaysia, trade chief says. reuters.com 25.09.2025.

[8] See: Auf der Suche nach Alternativen zu China.

[9] Samina Sultan, Jürgen Matthes: Neue US-Zölle auf Stahl- und Aluminiumprodukte: Schlimmer als gedacht. iwkoeln.de 15.09.2025.

[10] Jakob Hanke Vela, Jan Hildebrand, Julian Olk, Leila Al-Serori, Klaus Stratmann, Barbara Gillmann, Moritz Koch: Historische Kehrtwende – Schutzzölle und „Buy European“-Klauseln. handelsblatt.com 25.09.2025.

[11] Barbara Moens, Alice Hancock: EU industry chief pushes ‘buy European’ in response to Donald Trump. ft.com 21.05.2025.

[12] Jakob Hanke Vela, Jan Hildebrand, Julian Olk, Leila Al-Serori, Klaus Stratmann, Barbara Gillmann, Moritz Koch: Historische Kehrtwende – Schutzzölle und „Buy European“-Klauseln. handelsblatt.com 25.09.2025.