European Commission President Ursula von der Leyen supported the recent EU trade deal with the United States, stating it provides stability and avoids a damaging trade war. She argued that a confrontation with the U.S. would have aided Russia and China, while negatively affecting European workers, consumers, and industries.
Although von der Leyen admitted the pact is not flawless, she emphasised its 15% “all inclusive” tariff structure which grants European firms better market access than other U.S. partners. The agreement was made with President Trump in Scotland last month and has faced criticism within Europe from lawmakers and industry groups, though both parties have started to formalise it.
Reduced Us Tariffs On European Cars
The deal includes reduced U.S. tariffs on European cars and could lead to discounts on steel and aluminium. However, EU officials are still seeking reductions on wine and spirits, which were excluded. German Chancellor Friedrich Merz also supported the accord, acknowledging that while tariffs will impact Germany’s economy, this result is preferable to engaging in a full-scale trade war.
With the threat of a full-blown trade war with the U.S. now off the table, we should anticipate a continued drop in market volatility. Europe’s VSTOXX volatility index has already fallen below 15, a significant decline since the deal was announced last month. This calm is a direct response to avoiding the kind of market turmoil we saw during the 2018-2019 trade disputes.
The most direct beneficiaries are European automakers, and derivatives should be positioned accordingly. Since the July announcement, we’ve seen shares in car manufacturers like Volkswagen and BMW rally over 8%, as the U.S. market accounts for a huge portion of their high-margin sales. Bullish positions through call options or futures on the German DAX index, which is heavy with auto stocks, seem prudent.
For steel and aluminum producers, the situation is less certain, creating an opportunity in options pricing. The deal only suggests a *possibility* of future tariff discounts, not a guarantee. Implied volatility on options for stocks like ArcelorMittal remains high, suggesting traders can position for a sharp move if and when concrete details on metal tariffs are confirmed.
Impact On Wine And Spirits
Conversely, we should be cautious about sectors left out of the agreement, specifically wine and spirits. Major French beverage companies have underperformed the wider market in August 2025, and they remain exposed to existing U.S. tariffs. Hedging or taking bearish positions on these names through put options could protect against further downside.
This renewed stability in trade relations is also strengthening the euro against the dollar. The EUR/USD pair has climbed from around 1.08 to 1.11 in the past month as fears of an economic conflict receded. We can expect this trend to continue as long as the deal holds, making long euro positions attractive.
However, we must remember the deal is still being formalized and faces criticism. Any news suggesting a delay or challenge from European lawmakers could quickly reverse these trends. Therefore, maintaining some protective put options on broad market indices like the Euro Stoxx 50 is a sensible hedge against political risk in the coming weeks.
