The EU-US trade agreement is facing intense criticism from European policymakers and industry leaders who deem it unbalanced, unfair, and a “significant policy mistake.” The persistence of high US tariffs and mounting non-tariff barriers are severely hurting Europe’s export-oriented industrial sector. Experts warn the deal has cornered the EU, increasing its dependency on critical raw materials and semiconductors.
Specifically, US Section 232 tariffs on steel and aluminium derivatives are crippling the machinery sector with complex compliance rules. Failure to comply can trigger punitive tariffs up to 200%, prompting some firms to halt US exports entirely and leading to a sharp drop in sales (e.g., German machinery exports have fallen 18.5%). EU lawmakers are now pushing for amendments, including sunset clauses and safeguards, amid concerns that the current framework is unsustainable.
Source: Euractiv Read The Article
PSR Analysis: These mounting export barriers are projected to negatively impact European vehicle production volumes, both on-road and off-road, in 2026. For on-road vehicles (passenger cars), while a modest production recovery of approximately 1.9% is possible in 2026, volumes are forecast to remain significantly below pre-pandemic levels due to new, escalating US tariffs (up to 15-50% on EU-made cars) and intense competition from global rivals.
To bypass these tariffs and preserve market share, European automakers are incentivized to shift new production and investment to the US, which risks the long-term contraction or “hollowing out” of EU manufacturing capacity.
For off-road vehicles (construction, agriculture, etc.), which are steel-intensive and rely on general machinery, the production outlook is severely depressed. Punitive tariffs, high compliance costs, and restricted access to the US market for components ensure that the sector will face reduced volumes, margin erosion, and sustained challenges to global competitiveness in 2026. PSR
Emiliano Marzoli is Manager of European Operations for Power Systems Research
