On 27 July 2025, the European Union (EU) announced a trade deal with the United States (US), averting a potential 30% tariff escalation.[1] Failure to conclude negotiations risked a transatlantic economic relationship valued at $2 trillion annually, which is nearly 6% of global trade in goods and services.[2]  In addition to tariffs, there is also agreement on EU purchases of energy products, and to work together on economic security, access to critical energy and investment facilitation.  This blog examines some of the implications of this announcement, reflecting how it could shift the EU’s key trade relationships in energy and influence its progress toward achieving climate goals.

The terms of the deal

The deal sets a 15% base tariff on most EU exports to the US, effectively halving the previously threatened tariff rate. The agreed 15% baseline tariff is understood to be applied on an inclusive basis and not as an additive layer to pre-existing rates. Both sides appear to have agreed on zero-for-zero tariffs for a number of strategic products. This includes all aircraft and component parts, certain chemicals, certain generics, semiconductor equipment, certain agricultural products, natural resources, and critical raw materials. Officials also confirmed that work will continue to expand this list. As part of the deal, the EU intends to purchase $750 billion in US energy products, particularly oil, liquified natural gas and nuclear energy products by 2028. There is also a ‘commitment’ to invest an additional $600 billion into the US economy across various sectors by 2029.[3].

A close reading of the official statements released by the European Commission and the White House reveals several inconsistencies and fails to clarify an agreement on tariff lines for several sectors. Discussions are ongoing regarding tariffs on steel, pharmaceuticals, wine and spirits. The White House Factsheet affirms the establishment of stronger rules of origin (ROO) and eliminating barriers to digital trade.[4]

How the investments and import commitments could be ensured is unclear. In principle, the European Commission does not possess the legal authority to bind its member states to such large-scale commercial procurements, particularly in areas where there is recognition of shared competence. Energy purchases in the EU are driven by private sector decisions and governed by market mechanisms, rather than being centrally mandated by the EU Commission.

Structure of the EU energy import market

The EU–US trade deal references liquefied natural gas, petroleum oils, and nuclear energy products, but the final agreement is still pending clarification on which nuclear energy products are covered. As such, our estimates exclude nuclear energy and are based solely on liquefied natural gas and petroleum oils. The EU imported only $714 million[5] worth of nuclear energy products from the US in 2024. Given this number, it is plausible for us to assume that the EU $250 billion annual investment commitment will mostly comprise imports of petroleum oils and LNG.

Recent trends in extra-EU energy imports provide useful a context for understanding the scale of the EU’s new energy trade commitment.

 Table 1:EU Imports of Energy Products from the US and the World, 2018-2024, Trade in Value ($ billion)[6]

 Source: UN Comtrade

The peak in 2022 ($532 billion) reflects emergency supply measures and soaring prices at the advent of the Ukraine-Russia war. However, by 2024, total extra-EU energy imports had already fallen to $354 billion, as prices cooled and consumption patterns adjusted.

In 2024, the United States emerged as the leading exporter to the EU in key categories such as liquefied natural gas (LNG, HS 271111) and petroleum oil (HS 270900), accounting for approximately 21.24% of the EU’s total energy imports (Table 1).According to UN Comtrade data, the EU imported approximately $75 billion (table 2) in energy products (petroleum oils and LNG) from the US in 2024. Russia, while the second-largest exporter to the EU in the broader LNG category (HS 271111) accounting for almost 16 percent (as shown in figure1), plays a relatively minor role in petroleum oil exports (HS 270900), and does not even belong in the list of top five exporters to the EU (as shown in figure 2). Given Russia’s limited presence in petroleum oil (HS 270900), any further increase in US exports is likely to affect other significant suppliers such as Norway and Kazakhstan.

At the same time, growing reliance on the US for LNG (HS 271111) may gradually displace exports from traditional suppliers, including Algeria and Qatar, who currently lag behind both the United States and Russia in these product categories.

Figure 1: Share of top five countries from where the EU imports LNG, 2024

 

Source : Author’s Calculation (UN Comtrade)

Figure 2: Figure 1: Share of top five countries from where the EU imports in category petroleum oils, 2024

Source : Author’s Calculation (UN Comtrade)

Understanding the strategic implications

To meet the US import commitment of $750 billion by 2028 implies an annual increase to approximately $250 billion in energy products. This means imports should approximately increase by 233% annually, based on current import levels and assuming no proportional growth in imports from other partners.

This would make the US the dominant energy supplier to Europe. For comparison, total EU imports of oil and liquified natural gas from the entire world in 2024 amounted to approximately $354 billion. Under the proposed deal, and based on current import levels, nearly 70% of the EU’s oil and liquified natural gas demand would need to come from the US.

Such realignment would change Europe’s energy supply chain. Energy diversification has been a central pillar of the EU’s energy security policy, yet this deal could lead to significant dependency on the US.

The EU Green Deal and Fit for 55 commits the EU to a phased reduction in fossil fuel consumption in favour of renewable energy sources. The demand for natural gas in the EU is expected to decline by 2% in 2026 and by 7% by 2030[7]. If the EU sticks to its decarbonization commitments and reduces consumption in line with these forecasts, it risks purchasing more fossil fuels than necessary, leading to an oversupply. This would allocate financial resources to high-cost[8] US LNG imports for gas that the EU does not require, funds that perhaps could have been more effectively redirected towards investment in renewable energy sources, which have seen a decline in prices[9]. Additionally, to meet its fixed import commitments, the EU may find itself compelled to maintain or even increase fossil fuel consumption, thereby contradicting its decarbonization agenda. Such a move would jeopardise its 2030 and 2050 climate goals, effectively locking the EU into fossil fuel dependency for longer than its stated commitments allow. Growing reliance on US LNG imports, despite the US’s significant methane emissions in oil and gas production, complicates the EU’s position as a climate leader, highlighting a trade-off between energy security and environmental ambitions.

The extent to which this deal focuses on imports of nuclear energy products  (which complement the expansion of renewable energy, such as advanced nuclear reactors) over oil and gas, may determine whether it acts as a stepping stone or a stumbling block in the effort to reduce fossil fuel consumption.

Conclusion

The growing role of the US as an energy supplier to the EU has the potential to alter established trade patterns and affect the market shares of current exporters. While greater reliance on US fossil fuels might provide short-term supply security, it also poses questions about the EU’s green transition ambitions. Increased fossil fuel imports risk slowing progress towards decarbonisation and could create new dependencies that challenge energy resilience.

Ultimately, the impact remains uncertain. Much depends on how the upcoming EU–US trade deal is implemented and how market participants respond. Pricing dynamics, infrastructure constraints, and policy decisions will all play critical roles.

Footnotes

[1] https://transatlantic.amchameu.eu/

[2] https://unctad.org/news/global-trade-hits-record-33-trillion-2024-driven-services-and-developing-economies

[3]https://ec.europa.eu/commission/presscorner/detail/en/qanda_25_1930

[4] White House Factsheet: Fact Sheet: The United States and European Union Reach Massive Trade Deal – The White House

EU Commission Statement: https://ec.europa.eu/commission/presscorner/api/files/document/print/en/qanda_25_1930/QANDA_25_1930_EN.pdf

[5] For the purposes of this analysis, “nuclear energy products” include trade under the following HS codes: 284011, 284410, 284420, 284430, 284442, 840110, and 840140.

[6] This analysis focuses on two product codes at the 6-digit HS level: 270900 (petroleum oils) and 271111 (liquefied natural gas).  According to Eurostat, energy products include 27090010 (petroleum oils from natural gas condensates), 27090090 (crude petroleum oils and oils from bituminous minerals), 27111100 (liquefied natural gas), and 27112100 (natural gas in gaseous state). Solid fuels such as coal (2701), lignite (2702), peat (2703), and coke (2704) are also classified as energy products by Eurostat. However, this analysis does not consider solid fuels and is calculated only at the HS 6-digit level. This approach aligns with the classification used in Eurostat’s report on EU imports of energy products  latest developments. EU imports of energy products – latest developments – Statistics Explained – Eurostat

[7] Forecast for 2026: IEA Gas Market Report, Q3-2025; Forecast for 2030 (https://www.iea.org/reports/gas-market-report-q3-2025 ); Forecast for 2030: https://ember-energy.org/latest-insights/eu-national-targets-show-gas-in-decline/

[8] EU27 members pay considerably more for American imports LNG than other counterparts.  Source: IEEFA’s energy European Energy Tracker; https://ieefa.org/european-lng-tracker#section5

[9] https://about.bnef.com/insights/clean-energy/global-cost-of-renewables-to-continue-falling-in-2025-as-china-extends-manufacturing-lead-bloombergnef/

 

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