ECONOMY – The EU-US Turnberry Agreement (July 2025) and the Reconfiguration of Tariff Risks: Trade Stabilization, Geopolitical Coercion, and Effects on Consumer Markets

By François Souty, PhD in Economic History, former senior French civil servant for decades in French and EU Competition Authorities, is notably former International Affairs Officer at the European Commission’s Directorate-General for Competition (2021-2024). Author of some fifteen books on competition law and policy and economic history, he teaches European competition law at the Faculty of Law of Nantes-Université and Geopolitics at Excelia Business School Group (La Rochelle-Paris Cachan).

Since the end of the 2010s, transatlantic trade relations have been profoundly transformed by the increasing politicisation of tariff instruments. Initially conceived as tools for sectoral protection or the correction of trade imbalances, customs duties have become levers of strategic pressure, mobilized in contexts where economic, security and diplomatic issues intersect¹.

The so-called Turnberry Agreement, concluded in July 2025 between the European Union and the United States, is part of this trajectory. Presented as an instrument for stabilising trade, it is neither a classic free trade agreement nor a simple suspension of trade hostilities, but a political framework aimed at containing the risks of generalised tariff escalation. Its main objective is to restore a minimum of predictability to transatlantic trade while leaving significant national room for manœuvre

In addition to this fragile balance, at the beginning of 2026, there is a new geopolitical dimension, linked to tensions around Groenland and US threats to impose targeted additional duties on several European states. This context calls for an in-depth analysis of the concrete consequences of the Turnberry Agreement, not only for trade in goods and services, but above all for consumer markets and the prices paid by end-consumers.

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I. The Turnberry Agreement: A Crisis Stabilization Framework with a Limited Scope

The Turnberry Agreement represents an unprecedented political framework for regulating transatlantic trade relations. It is characterised by its hybrid nature, halfway between a classic trade treaty and a political protocol of de-escalation. The parties’ stated objective is to limit the unilateral imposition of tariffs, in particular those that had been introduced on steel and aluminum, while preserving the possibility for each party to protect certain critical sectors. The agreement does not impose binding regulatory harmonization or legally enforceable mechanisms, which clearly distinguishes it from previous multilateral trade agreements¹.

The tariff capping mechanism, set at an indicative level of 15% for the majority of industrial and agricultural goods, is accompanied by a temporary freeze on already existing retaliatory measures². This approach allows companies to reduce uncertainty about import and export costs, but it leaves grey areas for strategic sectors. The steel and aluminum industries, for example, remain largely excluded from de-escalation mechanisms, due to national security reasons invoked by the United States³. This exclusion illustrates a structural limitation of the agreement, which aims more to prevent a collapse of trade than to guarantee full and balanced regulation.

Beyond metals, other sensitive sectors also remain outside the immediate scope. Some European agricultural products, digital services and access to US public procurement are the subject of separate negotiations or previous legal frameworks. This segmentation leads to a hybrid situation: for some industries, the agreement offers relative predictability, while for others, there is total uncertainty. Therefore, while the Turnberry deal has reduced the risk of an immediate trade conflict, its operational scope remains limited, leaving many companies exposed to potential tariff fluctuations and constant strategic pressure.

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II. Short-term economic effects

The direct impact of the agreement on the real economy is manifested first of all in a significant reduction in trade uncertainty. European and US companies can plan their supply chains with a clearer horizon, incorporating the predictability of capped tariffs. This stabilization reduces volatility in middle markets and allows companies to limit the abrupt price adjustments that would have been necessary in the absence of an agreement⁴.

However, the economic transmission is not uniform. Existing tariffs on metals—particularly aluminum—continue to weigh on the costs of producing finished goods. Aluminum accounts for a significant portion of the cost of some products, such as packaging and packaged goods, and any changes in the price of this metal are indirectly reflected in consumer prices.⁵ This indirect inflation is often gradual, diffuse and sectoral, but it cumulatively affects the purchasing power and competitiveness of exporting firms.

In addition, the agreement influences industrial and commercial strategies. Companies are adapting their value chains to minimize exposure to excluded sectors or sectors with high price volatility. This reorganisation entails additional logistical and administrative costs, which are partly passed on to the consumer. The stability offered by Turnberry is therefore relative: it protects against extreme shocks, but does not neutralize structural price pressures or constraints related to dependence on imported metals and inputs⁶.

III. The Breakthrough Scenario: Tariff Threats and Geopolitical Coercion

Despite the agreement, the beginning of 2026 highlights the fragility of transatlantic stability in the face of geopolitical crises. The US threats to impose additional tariffs of 10 to 25% on certain European products, in the context of Groenland, illustrate the use of trade instruments as levers of political pressure⁷. These threats are reinforced by Europe’s military and technological dependence on the United States, which severely limits the EU’s ability to respond autonomously.

The potential impact of these measures on consumer markets is direct and indirect. European exporters to the United States would face an immediate increase in their costs, with some of it absorbed by corporate margins and the other passed on to domestic prices. In the event of European countermeasures, consumers could experience an increase in the cost of U.S. imported goods, worsening imported inflation and market fragmentation⁸.

These threats also reveal the limitations of Turnberry. The agreement can stabilise trade in normal times, but it does not provide for automatic resolution mechanisms in the event of major geopolitical crises. The use of tariffs as an instrument of coercion underscores that the predictability offered by Turnberry is conditional and that market stability depends more on political dynamics than on the legal structure of the agreement. This situation forces European States to simultaneously integrate the economic, political and military dimensions into their trade strategy, a complexity that transforms price and supply chain management into an exercise in permanent diplomacy.

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IV. Main policy options for Europe in the face of the Greenland crisis

The situation around Groenland opens up a complex set of scenarios for the European Union. The main challenge is to preserve Danish sovereignty over the territory while avoiding the risk of trade escalation with the United States, particularly because of the strategic dependence of European states on American military technology. At least half of European Member States are almost completely dependent on the United States for air defence systems, satellites and advanced cyber capabilities¹. This reality severely reduces the EU’s room for manoeuvre, as any attempt at trade confrontation or an overly aggressive response could aggravate the crisis and jeopardise collective security.

Three main options are emerging, all with strong constraints. The first is to adopt a diplomatic approach of compromise, aimed at preserving Danish sovereignty while avoiding punitive tariff increases. This path is based on intensive bilateral dialogue with Washington and concessions on strategic goods or services, possibly accompanied by a timetable for progressive exemptions from customs duties. This approach makes it possible to maintain trade and security stability, but requires tangible concessions to the United States, which are perceived as a weakening of the European position.

The second option is a limited and targeted response, which demonstrates European firmness while reducing the risk of total escalation. It can take the form of retaliatory measures on certain American products, accompanied by active political mediation. This strategy retains negotiating leverage, but it can worsen inflation in certain markets and cause an economic backlash on European companies dependent on American exports³.

The third option is based on a reinforced resistance, aimed at defending Danish sovereignty without concessions. This firm and consistent diplomatic posture would most likely trigger maximum US tariff hikes and reveal European vulnerabilities related to military dependence. An intermediate combination, combining active diplomacy, limited concessions and targeted protection of key markets, seems at this stage the most realistic, as it allows for the preservation of sovereignty while offering an acceptable exit for Washington⁴.

Conclusion

Looking at the European and French situation, particularly in January 2026, the Turnberry Agreement plays a very imperfect stabilising role. It protects European consumer markets from a generalized tariff surge, but it does not neutralize structural inflationary pressures or the geopolitical use of tariffs that increasingly seems to be becoming an international norm dictated by the strongest. From an operational point of view, the consequences for end consumers in Europe are reflected in gradual and sectoral price increases, prudent industrial strategies limiting competition and widening price differentials between regions. The agreement temporarily channels tariff risk, but price stability depends less on formal agreements than on the ability of economies to absorb repeated and politically motivated trade shocks. European political decision-makers are hardly in agreement among themselves and France’s extremely worrying budgetary situation will prevent it from relaunching an effective recovery dynamic in the long term, at least until 2027. The most worrying thing goes beyond the trade context: Europeans have not begun to prepare responses to the criticisms addressed by the American president on the socio-demographic destabilization of Europe resulting from an uncontrolled migratory flood that is not addressed from the point of view of the internal stability of European societies and of the explosion of budgetary costs imposed to the detriment of European defense vis-à-vis external and internal predators.    

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Notes and references

1. H. Farrell & A. L. Newman, « Weaponized Interdependence: How Global Economic Networks Shape State Coercion, » International Security, vol. 44, no. 1, MIT Press, 2019, pp. 42–79.
2. European Commission (DG TRADE), EU–US Trade Relations: Stabilisation Framework Following the Turnberry Declaration, Brussels, 2025, pp. 5–9.
3. Simon J. Evenett, Trade Policy as Statecraft: Weaponised Interdependence in Transatlantic Relations, CEPR, 2024, pp. 14–18.
4. R. Blackwill, & J. Harris, War by Other Means: Geoeconomics and Statecraft, Harvard University Press, 2016, pp. 87–123.
5. OECD, Global Value Chains and Trade Policy Shocks, Paris, 2023, pp. 67–89.
6. European Central Bank, Trade Fragmentation and Consumer Prices in the Euro Area, 2024, pp. 19–29.
7. C.P. Bown, Trump’s Steel and Aluminum Tariffs: Economic and Legal Perspectives, Peterson Institute for International Economics, Working Paper 19-9, 2025, pp. 1–12.
8. IMF, World Economic Outlook – Trade and Inflation, Washington D.C., October 2025, chap. 2, pp. 55–82.

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