On July 27, 2025, the United States and the European Union announced a preliminary trade and investment agreement in Turnberry, Scotland. However, nothing was actually signed, and even if it had been, it wouldn’t be worth the paper it was written on. Recall that, during his first term, US President Donald Trump signed a formal trade agreement with Canada and Mexico – and then canceled it as soon as he returned to office.
Any agreement with Trump, then, must be considered, at best, a temporary truce. It will only last until the capricious American leader sees or hears someone or something that turns the new fad into official policy.
Still, it’s worth recalling the details of the Turnberry Agreement, because some of them were quite unusual. Given that Europe has 30% more population and only a slightly smaller economy (in purchasing power parity terms) than the US, standard negotiation theory suggests that any deal should be roughly symmetrical. Instead, this one was completely one-sided. In addition to the US imposing unfair tariffs on European imports, Europe committed to investing in the US and buying American energy.
Of course, the EU can’t promise anything like that. As I jokingly pointed out to European trade negotiators, Europe is not (yet) a planned economy. The EU can’t force Europeans to invest or buy in a certain way; the Turnberry figures were offered solely to appease Trump and to brag about how he used America’s power to claim another scalp and extract additional value from global supply chains. Who cares if international law is flouted? That’s simply how great powers operate. Just look at Russia and its war of conquest against a peaceful neighbor.
As I expected, the truce did not last. Less than a month later, Trump threatened Europe again, this time over the Digital Markets Act, which aims to ensure market competition, and the Digital Services Act, which is supposed to mitigate the harm that digital platforms are doing to Europe. Among other things, the EU is demanding a degree of “content moderation” to prevent algorithmic intensification of calls for violence and the spread of disinformation - phenomena that have had disastrous consequences in Myanmar - and is insisting on taxing big tech companies (which have used their brilliant minds not only to attract users, but also to avoid paying taxes).
Contrary to what Trump seems to think, these regulations do not discriminate against the US and its tech giants. They apply equally to all companies operating within the EU and are the result of a long and thoughtful process in which European regulators and lawmakers carefully weighed the benefits and costs of different approaches in the context of a rapidly changing world, coupled with even faster-changing technology. As in all such processes, opinions have differed, with some fearing that the rules are too restrictive.
But I, like many others, worry that these rules are not restrictive enough. Tech giants still have too much market power, exercise too little control over content, and continue to abuse the right to privacy. This situation has serious negative consequences for European society, especially its young people, and for democracy as a whole.
But the question the EU now faces is different. Whatever their stance on existing rules, Europeans must decide whether to surrender their sovereignty and democratic processes to a violent authoritarian populist, supported (and often directed) by American tech oligarchs. Trump has consistently shown himself to be acting in the interests of his closest allies and family members, not in the interests of the American people - and certainly not in the interests of Europe.
By now we should all know that giving in will only lead to greater demands in the future. There is no point in bowing down to a country ruled by a president-king who is above the law, a man driven solely by personal obsessions, misconceptions about the economy, and unfounded - and therefore intractable - grievances. European values are too important to be traded.
True, opposing Trump may incur short-term costs, especially for companies that depend on the US market. But while economists have long acknowledged that trade brings benefits when conducted on fair terms, Trump is trying to squeeze as much added value out of global supply chains as possible, meaning that the benefits for Europe are significantly reduced and possibly even negative.
The European Union has the economic strength to withstand Trump’s tariffs, especially now that it is investing in rearmament to win the war in Ukraine. Moreover, the losses that would result from giving in would be much greater. The principles that have governed international trade since World War II are essential to its broad benefits. Without the rule of law, markets do not deliver efficient or fair outcomes. Investors would be discouraged, growth would suffer, and democracy would be further undermined.
When Chinese President Xi Jinping confronted Trump, Trump backed down. And recently, Brazilian President Luiz Inacio Lula da Silva made it clear that there are things that cannot be questioned: his country's sovereignty, dignity, the rule of law, and democracy. The European Union should do the same.
The author is an American economic expert; he is the winner of the Nobel Prize in Economics; is a professor at Columbia University; was the chief economist of the World Bank (1997-2000)
Copyright: Project Syndicate, 2025. (translation: NR)
Bonus video:
