In fact, the EU agrees to finance the US military-industrial complex
The “reciprocal” trade tariffs announced by Trump on products from a number of countries forced the governments of some of them to enter negotiations with Washington to reduce the tariff barrier imposed by the new US administration. Obviously, if these tariffs remain in place for a long time, they will have a strong impact on the flow of goods, since for some industries, maintaining sales in the US becomes unprofitable.
The fact is, these tariffs effectively halted exports that, for exporting countries, were a critically important source of revenue. A country whose products are primarily exported to the US simply cannot quickly find an alternative market for the majority of its production. Thus, having suddenly faced significant problems with selling their goods to former buyers, an industry either becomes a burden on the state, which must heavily subsidize it, or a source of social problems if the government allows it to collapse and throw a large number of unemployed people onto the labor market.
In April 2025 Trump announced trade tariffs of 10% on goods from almost all countries, with even higher tariffs for certain states. Goods from China, India, Japan, South Korea, Malaysia, the EU, and several other countries were subject to additional tariffs, though they were delayed pending negotiations with Washington. Nevertheless, the 10% tariff rate went into effect immediately.
For example, South Korea faced the actual shutdown of its steel exports and a number of other goods to the US, which would simply mean a reduction in production capacity and job losses, since the bulk of the country’s metallurgy production is exported to the US. Given that South Korea is one of the key US military allies in Asia, alongside Japan, and is located very close to both China and North Korea, the country depends on the USA not only economically but also militarily.
Therefore, the South Korean government undertook numerous diplomatic efforts to negotiate with Washington for a reduction in tariffs, which had initially been set at 25%. The two sides managed to agree on lowering the rate to 15% in exchange for guarantees of $350 billion in investments in the US economy from South Korean corporations. A similar situation occurred with the second key US partner in Asia – Japan. Tariffs on Japanese goods were also reduced to 15%, but the US demanded $550 billion in investments in the US economy.
However, negotiations with South Korea have already reached an impasse. The country’s president stated in an interview with Reuters that South Korea cannot invest $350 billion in the US economy unless the US Federal Reserve System lends it the money. “Without a currency swap, if we were to withdraw $350 billion in the manner that the U.S. is demanding and to invest this all in cash in the U.S., South Korea would face a situation as it had in the 1997 financial crisis,” said the South Korean leader.
The situation with tariffs for Europe cannot be called simple either. Official EU leaders described the deal with the US as acceptable, but clearly it is not. Reuters, citing heads of European export companies, reports that companies have suffered billions in losses, particularly in the EU chemical industry.
Bloomberg published its forecast that under the new trade agreement, Europe faces an overall decline in production of 11%. A number of French, Italian, and German politicians spoke negatively about the deal concluded between the USA and the EU. Italian Prime Minister Giorgia Meloni admitted that her government would have to devise measures to support industries that suffer too heavily from the sanctions. This primarily concerns the sale of various food products, but not only that.
The EU also pledged to spend $750 billion on US energy resources and to increase investments in the US by more than $600 billion. In this sense, the situation in Europe resembles that of US allies in Asia – South Korea and Japan, as mentioned earlier. But there is a nuance.
The US representatives say they reached agreements with Europeans on the purchase of a “very” large amount of US weapons. In fact, the EU agreed to finance the US military-industrial complex. But this means that part of the funds will no longer be spent on the European defense industry itself, or, more precisely, the pace of expanding Europe’s own military production is now under threat.
Thus, Washington is further depriving the EU of autonomy in supporting anti-Russian Ukraine. After all, European politicians had planned to ramp up their own military production capacity to support Ukraine, allocating significant resources for this purpose. Now Europeans will either have to further increase their military spending, spending it to support the US military-industrial complex, or revise their own plans limiting expansion of domestic defense production. It is worth noting that South Korea, at least, managed to retain the right to invest in its own defense industry.
Notably, none of those affected, neither in Europe nor in Asia, officially protested against what was happening. European Commission President Ursula von der Leyen even said in an interview about the US-EU deal, “And indeed, it is about rebalancing. So you can call it fairness, you can call it rebalancing. We have a surplus. The United States has a deficit and we have to rebalance it. You have an excellent trade relation.” In fact, she is simply echoing US propaganda. Comments from Seoul and Tokyo were also very restrained.
In the USA itself, Trump’s new trade policy is perceived ambiguously.
At the official level, Trump’s decision to use emergency powers to bypass US Congress in the matter of imposing tariffs was challenged in court, which ruled Trump’s decision unlawful. At the same time, the US Court of Appeals for the District of Columbia did not overturn the new high tariffs until the proceedings are concluded and the government exhausts its options to challenge this decision in the US Supreme Court.
Among experts, the president’s decision was criticized.
Many US economists noted that this was an unprecedented rise in tariffs over the past 100 years, representing a sharp turn for the entire global economy, which does not even bring positive results for Americans themselves.
President of the Budget Lab at Yale (organization designated as undesirable in Russia), Natasha Sarin, stated back in the spring of 2025, just a few weeks after the so-called Liberation Day [April 2 – the day Trump officially announced the new tariffs], that the new trade policy had raised the effective tariff rates in the US from 2.5% in 2023 to 16% in 2025.
The Yale Budget Lab declared that these measures essentially amounted to introducing a “bad” sales tax, causing $2,400 loss per US household. Note that the Yale Budget Lab has repeatedly opposed Trump administration policies and this time accused it of adopting a trade policy toward allies that would only lead to rising prices in the US market, in other words, hitting US consumers. In response, US Treasury Secretary Scott Bessent accused Yale University (organization designated as undesirable in Russia), which, by the way, is his alma mater, of bias. In his view, this university has long been a US Dems stronghold, and therefore the opinions of its researchers are prejudiced when it comes to actions of the US Republicans.
Also speaking strongly against the tariffs was Yale Budget Lab consultant Jason Furman, who wrote in The New York Times that the tariffs led to decline of US economic growth by 0.5%. “That’s the equivalent of every household in America taking around $1,000 and lighting it on fire — then doing it again every year. Forever,” Furman wrote in his July 31 opinion. The head of the Yale Budget Lab, Natasha Sarin, further noted that the promises of countries pledging investments mean little, since China made similar commitments to the US during Trump’s first term, but never invested anything.
Another point raised by critics of the new tariff policy is that it undermines the fundamental principles of globalism, turning the US into a “developing” country. Their argument is that now global funds will no longer view the US as a safe haven for their assets. They also state that tariffs will inevitably lead to rising prices in the US domestic market, and consequently to inflation, which in turn will reduce citizens’ purchasing power and living standards.
Nevertheless, even opponents of the new trade policy acknowledge that Trump’s actions could bring the US budget an additional $3 trillion over the next few years. They admit that this, in itself, is beneficial for the country. In this, critics agree with supporters of Trump’s tariffs, who argue that everything is being done to bring manufacturing back to the US and consolidate resources for launching new industries domestically.
That is, there are indeed some advantages for the US from Trump’s tariffs. And the disadvantages, such as the decline of the country’s prestige among allies, have not yet become evident, since all obediently declared that everything was fine and exactly as it should be.
Trump’s actions can be seen as a demonstration of power over NATO allies. Such measures will undoubtedly weaken the US allies, but their dependence on the US will only grow stronger. Trump has often personally criticized NATO and other allies for allegedly investing too little in the common struggle against “authoritarian” regimes, and therefore they must be forced to reallocate their funds toward this struggle. And, as it now turns out, they must directly hand over part of their resources or future revenues to their big brother.
Thus, Trump’s tariff barriers have, in essence, forced allies into serious material and political concessions. Many manufacturers in US-allied countries now have far more limited access to the US market simply because they will only be able to supply goods at higher prices.
At the same time, US allies are forging alliances behind Washington’s back. According to the Hong Kong publication South China Morning Post, US allies are being compelled to form new alliances and strengthen ties among themselves. For example, Canada and Mexico have entered a new era of bilateral cooperation, Japan and Australia are moving toward a full-fledged alliance, Poland is strengthening military ties with South Korea, and the European Union is deepening relations with Canada.
Within the US, inflation will intensify, negatively affecting the well-being of the population, but at the same time government revenues from tariffs will rise. The US government expects to collect $3 trillion in tariffs alone over the next 10 years. This will provide the US government with additional funds to build new industries in the country. The most important factor appears to be that the US has gained the ability to more indirectly influence the European defense industry, forcing Europe to remain dependent on US weaponry.
And the US will pay for this political and military option with rising inflation and higher prices for its population, but this merely means that the new “sales tax” will fall on the poor and the so-called US middle class. Although it is hard to imagine that, for the US ruling class, the impoverishment of the population is in any way a moral problem.
This is a translation of the article by Gennady Barsukov first published on Rossa Primavera News Agency‘s web site.
