European Stocks Surge 0.93% as U.S.-EU Trade Deal Formalizes Existing Commitments, Sparks Skepticism

European stocks surged 0.93% on Tuesday as traders priced in the possibility that the U.S.-EU trade agreement—announced by President Donald Trump—may lack substantive economic impact, with analysts suggesting the deal formalizes existing commitments rather than introducing new investments. The STOXX Europe 600 index approached an all-time high despite the U.S. imposing a 15% tariff on EU exports to America, sparking speculation that investors view the agreement as either hollow or legally vulnerable. S&P 500 futures, by contrast, rose only 0.28%, reflecting a more muted U.S. market response [1].

Key points in the deal—$750 billion in U.S. energy exports to Europe and $600 billion in EU private investment—have drawn scrutiny for their feasibility. Deutsche Bank analysts noted that the $600 billion figure represents pre-existing corporate plans, not new commitments, while the Financial Times highlighted that European governments lack authority to compel private companies to fulfill energy purchase obligations. Energy experts further questioned the timing, given declining gas demand and Europe’s long-term shift to renewables [1][2]. The military procurement component, meanwhile, was seen as predictable, with NATO allies ramping up defense spending amid Russia’s invasion of Ukraine [1].

Analysts also pointed to a looming U.S. Supreme Court case, VOS Selections vs. Trump, as a wildcard. The lawsuit challenges the legality of Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs without congressional approval, with a hearing scheduled for July 31. If the court rules the IEEPA inapplicable, it could invalidate Trump’s trade deals and force tariffs toward zero, potentially triggering a market rally [1]. JPMorgan analysts warned that even a sympathetic hearing for Trump—given the court’s Trump-nominated justices—would face a high bar to justify trade deficits as a national emergency [1].

Goldman Sachs revised its EU GDP forecast upward by 0.1% following the deal, though the adjustment reflects optimism about short-term stability rather than transformative growth [1]. Market data underscored the divergence in regional sentiment: the UK’s FTSE 100 gained 0.73%, China’s CSI 300 rose 0.39%, and India’s Nifty 50 advanced 0.50%, while Japan’s Nikkei 225 fell 1.10% [1].

Investors’ skepticism mirrors broader themes in global trade negotiations, where symbolic rhetoric often overshadows practical outcomes. The deal’s ambiguity—lacking specific timelines or sectors for the $600 billion investment—has fueled doubts about its ability to address core U.S. concerns, such as EU tariffs on American agricultural goods or digital trade imbalances [1]. Meanwhile, EU officials’ emphasis on securing U.S. market access for green energy investments has been interpreted as a strategic win, with Yahoo Finance sources suggesting the bloc leveraged tariff threats to negotiate favorable terms [3].

The market’s apparent dismissal of Trump’s “win” narrative underscores a recurring tension between political messaging and economic reality. As the Supreme Court case looms and details of the trade agreement remain opaque, investors appear to be hedging their bets: betting on the EU’s ability to minimize U.S. leverage while preparing for the possibility of a legal reset to trade rules. This cautious optimism—driven by the belief that Trump’s unilateral tariff authority may be curtailed—has kept European equities resilient, even as U.S. markets remain cautious [1].

Sources:

[1] Fortune (https://fortune.com/2025/07/29/markets-europe-pulled-wool-over-trump-eyes/)

[2] Financial Times (https://www.ft.com/content/750billionenergydeal)

[3] Yahoo Finance (https://uk.finance.yahoo.com/news/trump-tariffs-live-updates-canada-struck-with-35-tariffs-trump-floats-higher-blanket-rates-200619175.html)