An illustration of the word tariffs on the EU logo. — Reuters
THERE are strong echoes of Donald Trump’s failed trade deal with China from his first term as US president in the framework agreement reached with the European Union (EU).
Trump and EU Commission president Ursula von der Leyen announced the deal for a 15% tariff on US imports of EU goods at the US leader’s golf course in Scotland on Sunday.
But more important than the 15% tariff rate was the apparent commitment by the EU to massively ramp up energy imports from the United States.
The agreement calls for EU imports of US energy, which currently are mainly crude oil and liquefied natural gas (LNG), of US$250bil a year for three years.
This is a delusional level of imports that the EU has virtually no chance of meeting, and one that US producers would also struggle to supply.
Massive challenge
Even if the EU did manage somehow to boost its energy imports from the United States to the US$250bil a year mark, it would also prove massively disruptive for energy flows around the rest of the world.
The numbers show the scale of the challenge. The 28 members of the EU imported 3.38 billion barrels of seaborne crude oil in 2024, according to data compiled by energy analysts Kpler.
Assuming the 2025 volume stays the same and the price paid per barrel averages around US$70, this means the EU will pay about US$236.6bil for its crude.
The EU’s imports from the United States were 573 million barrels in 2024, which if replicated this year would be valued at around US$40.1bil.
For LNG, the EU imported 82.68 million metric tonnes in 2024, which would have cost around US$51.26bil assuming an average price of around US$12 per million British thermal units (mmBtu).
Imports of the super-chilled fuel from the United States were 35.13 million tonnes in 2024, worth about US$21.78bil.
The EU also buys coal from the United States, the bulk being higher-value metallurgical coal used to make steel.
Total EU imports of metallurgical coal in 2024 were worth US$6.72bil, assuming an average price of US$200 per tonne, with those from the United States valued at US$2.67bil.
Putting together the value of EU imports of US crude oil, LNG and metallurgical coal gives a 2024 total of around US$64.55bil.
This is about 26% of the US$250bil the EU is supposed to spend on US energy a year under the framework agreement.
If the EU did ramp up its imports of US crude, LNG and metallurgical coal to US$250bil, it would account for 85% of its total spending on those energy commodities.
US exports
The United States exported 1.45 billion barrels of crude in 2024, according to Kpler, which would be worth US$101.5bil at a price of US$70 a barrel.
US shipments of LNG were 87.05 million tonnes in 2024, which would be worth about US$54bil at an average price of US$12 per mmBtu.
The US exported 51.53 million tonnes of metallurgical coal in 2024, worth US$10.3bil at an average price of US$200 a tonne.
Putting together the value of all three energy commodities gives a total of US$165.8bil, meaning that even if the EU bought the entire volume it would still fall well short of the US$250bil.
The scale of the delusion probably exceeds what Trump and China agreed in their so-called Phase 1 trade deal in December 2019, under which China was supposed to buy US$200bil of additional US energy by the end of 2021.
The reality is that China never even came close to buying that level, and its imports of US energy didn’t even reach what they were before Trump launched his first trade war in 2017.
Potential risks
There are a few caveats when looking at the framework agreement between Trump and Von der Leyen.
The first is that not all the details are known and the US$250bil of energy is also said to include nuclear fuel, although this will only be a small value even if included.
The second is the deal will probably include refined fuels, with US exports to the EU of products such as diesel, being almost 110 million barrels in 2024, worth about US$10.9bil assuming a price of US$100 a barrel.
But it’s still clear that the commitment to buy US$250bil in US energy is completely unrealistic and unachievable.
The smart people in the room must know this, begging the question as to why agree to what is obviously a ridiculous number?
What happens when the inevitable failure is realised? Perhaps the EU is hoping for the same outcome as China did with the first trade war with Trump in 2019.
Run down the clock, talk nice, and hope the next US president is easier to deal with. — Reuters
Clyde Russell is a columnist for Reuters. The views expressed here are the writer’s own.
