Vulcan View: The latest EU developments 28 July – 1 August

EU and US reach a trade agreement

On Sunday, 27 July, European Commission President Ursula von der Leyen met with US President Donald Trump in Scotland to advance discussions on EU-US trade relations ahead of the 1 August tariff implementation deadline set by the US administration. During the meeting, Trump indicated that, should an agreement be reached, this would be “the end of it for a number of years.”

A preliminary 15% tariff framework agreement was reached, under which the EU commits to purchasing $750 billion of energy and investing an additional $600 billion in military equipment. However, in the European Commission’s technical briefing on Monday, 28 July, it was noted that the $600 billion investment pledge is simply an “intention,” not a “guarantee.” An official stated, “It’s not something the EU, as a public authority, can guarantee – it’s something based on the intention of private companies.”

On Thursday, 31 July, US President Donald Trump signed an executive order, formalising tariffs of 15% on EU goods shipped to the US. The new duties will not go into effect on the originally stated date of 1 August. Instead, they will be implemented on 7 August, giving countries another window to negotiate.

Key details concerning the pharmaceutical sector, as well as semiconductors and other areas, are still under discussion. EU Trade Commissioner Maroš Šefčovič confirmed the EU had secured a verbal understanding that any future tariffs on pharmaceuticals would not exceed 15% – a cap that Mr. Šefčovič has expressed confidence in being respected by the US administration. However, this should be viewed with caution as it is not a legally binding commitment and would only become official through a US executive order after the section 232 on pharma and semiconductors investigation ends.

To advance the agreement, a three-page joint political statement is being prepared for endorsement by EU Member States. This document is expected by the Commission to be finalised by Friday, 1 August. However, recent reports suggest the joint statement will not be published on this date.

An EU negotiator described the current agreement as “not your standard trade agreement,” noting, “We are talking very much about a relatively light joint statement which has some very precise commitments and others which need to be spelt out in different ways.” 

In the meantime, the EU’s retaliatory tariff list is still on standby to come into effect on 7 August. The Commission has until 6 August to suspend or annul these measures. However, after President Trump’s executive order on Thursday confirming the 15% tariffs, the Commission will certainly suspend EU countermeasures for another 6 months.

EU moves to partially suspend Israel from Horizon Europe funding

The European Commission proposed on Tuesday, 29 July, a partial suspension of Israel’s participation in Horizon Europe, the EU’s €95 billion flagship research and innovation programme designed to drive economic growth, create jobs and improve citizens’ lives. The move follows a Commission review that raised concerns over Israel’s compliance with human rights obligations under the EU-Israel Association Agreement, particularly Article 2, which makes respect for human rights a core element of the partnership.

Under the proposal, Israeli start-ups and small businesses would no longer be eligible for grants or equity investments from the European Innovation Council’s (EIC) Accelerator, which supports disruptive and dual-use technologies such as artificial intelligence, drones, and cybersecurity. Since joining the programme as an associated country in 2021, Israeli technology companies have received roughly €200 million in EIC Accelerator funding. EU officials emphasise that the proposed suspension is “targeted and reversible”, leaving academic collaborations and research projects with Israeli universities unaffected.

EU officials describe the measure as a proportionate response that limits disruption to the wider trade and cooperation framework. However, several member states including, Spain and Ireland, argue that the EU should adopt tougher measures. An options paper presented to EU foreign ministers earlier this month laid out eight potential measures, ranging from suspending the association agreement to restricting visa-free travel for Israeli citizens. The paper also effectively signalled that Ireland could proceed with an import ban on goods from the occupied Palestinian territories, noting that member states are free to adopt their own measures.

International pressure is also mounting. This week, Canada, France and the UK stated they intend to recognise the State of Palestine, adding to calls within the EU for a tougher stance. Sweden has now also become the latest EU country to publicly support suspending the trade component of the EU-Israel Association Agreement.

Despite these developments, the support for suspending Horizon Europe remains uncertain. Early discussions among EU ambassadors on Tuesday failed to produce the qualified majority needed to approve the measure. Work on the proposal will continue in the coming days and weeks, as officials in Brussels seek to secure broader support among member states.

Eighteen EU Member States request €127 billion from SAFE programme

On Tuesday, 29 July, eighteen European Union Member States made a request to the European Commission in Brussels for a combined total of €127 billion in low-interest loans from the Security Action for Europe (SAFE) programme. The requests are part of a major new EU initiative designed to radically overhaul the continent’s defence capabilities, reduce its military dependence on the United States, and provide sustained, large-scale support for Ukraine.

What is the SAFE programme?

The enormous financial requests fall under a new scheme known as the SAFE programme. First proposed by the European Commission in March as part of its wider ‘ReArm Europe’ strategy, SAFE makes up to €150 billion available for Member States to borrow. The core idea is to leverage the EU’s collective financial power. The Commission will borrow the money on international financial markets at favourable rates and then lend it on to the participating nations.

The terms are highly attractive. Countries will have a 45-year timeframe to repay the cheap loans, giving them the fiscal space to make significant, long-term investments in their armed forces. By pooling their procurement orders, countries can negotiate lower prices from manufacturers than they could by going it alone, ensuring better value for taxpayers’ money. The initiative represents one of the most significant shifts in European security policy in decades, moving the bloc towards greater strategic autonomy.

Who wants the money? 

The strong interest in the programme, which exceeded initial estimates, demonstrates a new urgency among European leaders. The eighteen nations that have signed up span the continent, from founding members like France and Italy to Eastern European states on the frontline of tensions with Russia, including Poland, Estonia, and Lithuania. While the Commission has not released a country-by-country breakdown of the loan requests, some nations have announced their figures.

Leading the charge is Poland, whose Deputy Prime Minister confirmed that Warsaw has requested a staggering €45 billion. This single request highlights the immense pressure felt by countries in Eastern Europe to modernise their militaries in the face of regional instability.

Next steps

The key takeaway from this week’s announcement is the clear, unified political will across the EU to invest heavily in security and defence. While the initial “soft deadline” for expressing interest has passed, the Commission has indicated that the door remains open for other countries to join, with €23 billion still available in the fund.

Looking ahead, the participating nations now have until a final deadline of 30 November 2025 to submit their formal loan requests, along with detailed proposals for the specific defence projects they intend to finance. This will trigger the next phase, where the Commission begins the process of raising the capital. There is also potential for non-EU partners to participate, with the United Kingdom, having recently signed a security and defence partnership with Brussels, touted as a possible future participant.

Compliments of Vulcan Consulting – a member of the EACCNY