When European Commission President Ursula von der Leyen lowered her gaze before the US president at a meeting in Scotland in July and nodded obediently as he spoke about the trade agreement between the US and the EU, many economists were pleased. Not out of schadenfreude, though, even though it was a decent fiasco for the continent.
While European goods are subject to a flat 15 percent tariff in the US, the EU made concessions to the Americans and reduced tariffs to almost zero on average. Von der Leyen also promised Trump that the continent would purchase more liquefied gas and weapons. In short, it was a totally unbalanced agreement that only showed the EU that the emperor had no clothes.
Although European negotiators failed to achieve more favorable rates, it is commendable that they did not ultimately jump on Trump's wave of protectionism. In fact, there is unprecedented agreement in the scientific community on free trade (compared to other issues). Tariffs almost never solve the problem.
Why?
Because even if European countermeasures hurt producers on the other side of the pond, European consumers would feel the pinch in their own wallets in the form of higher prices.
A tariff is a tax on imported goods. These goods become more expensive. Domestic producers are therefore more comfortable, as it is more difficult for foreign competitors to establish themselves and some may end up exporting to that market. This again has consequences that are felt by the customer—companies are less motivated to improve their products and compete for them on price.
Headwind
Although Brussels deserves some praise for not getting caught up in a customs spiral and trade disputes with the US, it is doing the exact opposite in the area of green policy.
On January 1, 2026, the Carbon Border Adjustment Mechanism (CBAM), commonly known as the carbon tariff, will come into full effect.
In short, the EU wants to levy a customs duty on imports of certain products whose production is associated with high emissions, such as iron and steel, cement, aluminum, fertilizers, electricity, and hydrogen.
This is a kind of extension of the EU Emissions Trading System (EU ETS), which forces European companies to monitor how many emissions are generated in the production of products they purchase and import from abroad. And from the new year, they will have to pay the same amount for them as European producers pay for emission allowances.
The aim is to ensure that industry on the continent is not at a cost disadvantage compared to competitors from countries with lower environmental standards, where there are no carbon dioxide emission charges [if similar mechanisms exist in some countries, the amount already paid by foreign manufacturers in that country for emissions is deducted from the price of the emission allowance/CBAM certificate in the EU, editor's note].
In short, if carbon emissions are to be penalized, then everyone should be penalized equally.
An ecological surcharge. Whether you like it or not
However, it can be expected that foreign manufacturers will not pay too much for the carbon tax. Rather, it will be European traders and their local customers.
CBAM certificates will be purchased by those who import the goods, while it will be difficult to force foreign suppliers to "pay" for the carbon generated during production. A company in Asia will probably get paid as much for its goods as it has been until now, despite emitting carbon. And the cost of the emissions tax will be paid by the importer, who will pass it on to the consumer in the price of the product.
Only when it becomes too expensive and demand for the goods falls will European importers stop importing from abroad or reduce imports, and foreign manufacturers will face pressure to do something about the price of their products or the way they are manufactured.
In practice, however, this is not very likely for goods covered by the CBAM mechanism. These are basic items and materials that will always be needed. Brussels is once again making basic necessities more expensive for Europeans and, through environmental surcharges, forcing them to behave according to its own ideological framework.
The worst thing is that ordinary people know relatively little about how mechanisms such as carbon tariffs and emission allowances work and what their consequences are. So they just get upset when they see higher price tags in stores. They blame the first unsympathetic politician who comes their way. And even if they have information about it and disagree with the forced price increases, these fabrications from Brussels, which is far removed from the citizens, are very difficult to influence from below.