One year to the day after the handshake in Scotland, a new 10 percent US tariff on European goods and a nearly one billion dollar fine on Google have pushed the transatlantic trade truce to its most fragile point yet.
Peacock Tariff Consulting | US Trade Desk | July 27, 2026
WASHINGTON, July 27. The Turnberry Agreement turns one year old today, and neither Washington nor Brussels is celebrating. In the span of a single week, the United States imposed a new 10 percent tariff on most European Union goods under a forced labor investigation, the European Commission fined Google 890 million euros under its digital rulebook, and the US Trade Representative warned that “a real dialogue can only take place during a ceasefire.” The anniversary of the deal that was supposed to stabilize the world’s largest trading relationship finds that relationship openly quarreling over whether the deal still holds.
The immediate flashpoint is the Section 301 action that took effect at 12:01 a.m. Eastern Time on Friday, July 24. Following investigations into 60 economies’ failure to prohibit imports of goods made with forced labor, USTR imposed additional duties of 10 or 12.5 percent on virtually all US trading partners. The European Union drew the lower band: a 10 percent tariff applied net of a product’s most favored nation duty, meaning the new charge tops existing rates up to a 10 percent total rather than stacking on top of them. For most European goods, 10 percent is now the ceiling, not the floor.
That design detail matters enormously, and it explains why the official reaction in Brussels split in two within twenty-four hours.
A commission divided against itself
The European Commission’s formal response was conspicuously mild. A Commission spokesperson said the EU “notes positively the fact that this outcome is in line with the US tariff commitments” agreed under the Turnberry framework last year, according to Euractiv, and pointed to exemptions the United States granted for products important to European exporters, including cork, diamonds, aircraft and aircraft parts, generic medicines and active pharmaceutical ingredients. The spokesperson added that the announcement provides momentum to pursue further exemptions and to deepen cooperation on economic security, critical raw materials, artificial intelligence and digital policy. Trade press service MLex likewise reported that the Commission welcomed the new rate as consistent with the Turnberry understanding.
Then Kaja Kallas spoke. The Commission Vice-President and the bloc’s top diplomat called the new tariffs “a negative surprise” on Friday and described them as a breach of the Turnberry Agreement, telling reporters the EU had honored its side of the bargain. “That’s why this is a negative surprise that this agreement is not kept,” she said, in remarks reported by Reuters. Kallas also dismissed the premise of the forced labor investigation as applied to Europe. “If you compare our labour laws to the ones of the United States, I mean, we have paid vacations, we have very good labour conditions for our employees, so it’s not really grounded,” she said.
The two positions are not strictly contradictory. The Commission’s trade officials are grading the outcome against what might have been: the investigation could have produced the 12.5 percent rate that fell on 38 other economies, and the exemption lists could have been thinner. Kallas is grading it against the promise of Turnberry itself, under which, in the European reading, new unilateral tariff actions were not supposed to happen at all. But the split-screen response laid bare how little consensus exists in Brussels about whether to treat Washington as a difficult partner or an adversary in waiting.
Notably, the Section 301 determination does not accuse the European Union of using forced labor. The finding is that the bloc failed to adequately enforce a prohibition on imports of goods produced with forced labor elsewhere. USTR classified the EU among six economies, alongside Canada, Ecuador, Indonesia, Mexico and Pakistan, whose failure was one of enforcement rather than the absence of a ban, a distinction that earned the EU its lower rate. The EU adopted its own forced labor products regulation in 2024, but its main obligations do not bite until the end of 2027, a gap American investigators treated as an enforcement failure.
The Google fine and the ceasefire that wasn’t
If the tariff was Washington’s provocation, Brussels supplied its own on the very same day. On Thursday, July 23, the Commission announced an 890 million euro fine against Google, nearly one billion dollars, for breaching the Digital Markets Act, the bloc’s rulebook for large technology platforms. Within hours, Ambassador Jamieson Greer issued one of the sharpest statements of his tenure, accusing the Commission of “an increasingly aggressive approach targeting U.S. technology firms.”
Greer’s statement went well beyond the single fine. He cited two recent Commission actions under the Digital Markets Act aimed at Google’s Android operating system and Search services, which he said “pose serious risks for the privacy and security of users, represent a de facto forced technology transfer and intellectual property theft, and impose unreasonable financial penalties.” He offered a striking calculation: the EU’s accumulated fines against Google alone amount to more than 2 percent of the EU’s budget, which he called a larger contribution than many member states make. And he folded in a separate grievance, pointing to what he described as the largest ever state-backed loan to Airbus as further evidence that “the EU continues to target the most competitive U.S. companies.”
The core of the message was a warning that the digital enforcement agenda and the trade truce cannot coexist indefinitely. “The EU often claims that it is looking for stability and predictability in our trading relationship, but these actions are driving massive uncertainty for U.S. exports of goods and services to Europe,” Greer said. “We are trying to resolve our concerns with the EU’s Digital Markets Act and other actions through responsible, constructive dialogue. But a real dialogue can only take place during a ceasefire. The EU’s recent actions undermine these efforts and pose a real risk to the continuation of transatlantic stability with respect to trade.”
From a handshake in Scotland to a wall of caveats
The Turnberry Agreement was born on July 27, 2025, when Commission President Ursula von der Leyen and President Trump shook hands at the president’s golf resort in Scotland on a framework that capped US tariffs on the majority of European imports at 15 percent. It was always an unusual instrument: a political accord rather than a ratified treaty, sustained by mutual restraint rather than legal enforcement.
The bargain traded American tariff restraint for European concessions that went well beyond tariffs. As announced at the time, the framework contemplated large-scale European purchases of American energy, expanded European investment in the United States, and improved access for American goods to the European market, while Washington agreed to hold its duties on most European products at or below the 15 percent ceiling. Critics on both sides called it lopsided from the start: European commentators complained the bloc had paid for peace, while American skeptics noted the purchase and investment figures were aspirations without enforcement. What no one disputed was that it ended, for a time, the escalation spiral that had dominated the first half of 2025.
The past year has tested that construction repeatedly. In February, the US Supreme Court struck down the swath of global tariffs the administration had imposed under the International Emergency Economic Powers Act, including the 15 percent levy on most EU exports that formed Turnberry’s operative core. The administration bridged the gap with a temporary 10 percent surcharge under Section 122 of the Trade Act, which by statute could last only 150 days. The EU, for its part, paused its ratification process for the agreement amid the resulting volatility, according to market reports at the time. The forced labor Section 301 action that took effect on Friday is the permanent replacement for those stopgap measures, and the Section 122 surcharge expired the same day.
Seen through that lens, the new 10 percent net-of-MFN tariff is simultaneously a breach and a bargain. It is a fresh unilateral duty imposed on an ally that signed a truce, which is Kallas’s point. It is also lower than the 15 percent Turnberry ceiling, unstacked, and softened by exemptions on aircraft, pharmaceuticals and other priority lines, which is the Commission trade directorate’s point. Both things are true at once, and the ambiguity is likely deliberate: Washington preserved its leverage while giving Brussels enough to justify staying at the table.
How Europe’s treatment compares
The forced labor action sorted the world into tiers, and where the EU landed says much about the state of the relationship. Seventeen economies, including the United Kingdom, India, Mexico and Canada, received a flat 10 percent rate in recognition of forced labor import bans adopted, committed to, or partially in force. The EU and Taiwan received 10 percent net of MFN duties, a structure that is arguably more favorable still, since it caps rather than adds. Japan, South Korea and Switzerland drew net-of-MFN treatment at 12.5 percent, and the remaining 38 economies, including China, Brazil, Vietnam and Russia, pay a flat 12.5 percent on top of whatever they already faced, according to the Global Trade Alert’s breakdown of the Federal Register notice.
The United Kingdom’s placement in the flat 10 percent tier alongside the EU’s net-of-MFN 10 percent produced immediate comparisons in European trade circles. London locked in its treatment through an Agreement on Reciprocal Trade with Washington, the bilateral instrument the administration has used to reward partners that align with its trade agenda. Brussels, which has resisted converting the Turnberry handshake into that kind of formalized bargain, got a comparable headline rate but without the contractual insulation, a difference that may matter greatly if relations deteriorate further.
The exemption annexes tell a similar story of negotiated privilege. Beyond the universal exemption list available to all 60 economies, thirteen economies received their own additional product lists, and the European Union is among them, alongside the United Kingdom, Switzerland and a group of developing-country apparel suppliers. USTR stated openly that certain exemptions for the EU and others were designed to encourage those economies to fulfill commitments on forced labor import prohibitions, an explicit invitation to legislate in exchange for tariff relief. European officials note drily that the bloc already adopted a forced labor products regulation in 2024; the dispute is over timing and enforcement, since its obligations do not fully apply until late 2027.
More investigations in the pipeline
What worries European officials most is not the tariff now in force but the ones still gestating. USTR has two further Section 301 investigations aimed at Europe in progress. The first, opened in March, examines what Washington characterizes as structural excess capacity in European production. The second, initiated in June, targets Germany’s alleged persistent underpayment for innovative pharmaceuticals, an inquiry that could ultimately support duties or other measures against the EU’s largest economy. A Commission spokesperson confirmed the bloc would continue engaging with Washington on both, according to Euractiv.
Each investigation is a loaded instrument. Section 301 imposes no deadline for de-escalation and no expiration on remedies, and the forced labor action just demonstrated how quickly the administration can move from initiation to final tariffs: barely four months. European trade officials who spent 2025 assuming the transatlantic relationship had found its new equilibrium now confront the possibility that Turnberry was less a settlement than an armistice line from which new actions are launched.
The economic stakes
The numbers involved dwarf every other bilateral trade relationship. The European Union is the largest single trading partner of the United States, and transatlantic commerce in goods and services runs to well over one and a half trillion dollars annually when investment-driven trade is included. The EU consistently runs a substantial surplus in goods trade with the United States, a fact the administration cites regularly, while the United States runs a surplus in services, a fact Brussels cites just as regularly.
A 10 percent effective ceiling on most European goods is a real cost, but for many exporters it represents relief compared with the past eighteen months of whiplash. European wine, machinery, luxury goods and chemicals faced 15 percent under the original Turnberry cap, then the post-court 10 percent surcharge, and now a 10 percent net rate with wider exemptions. The exemption of aircraft and parts protects the single most valuable category of transatlantic industrial trade, and the carve-outs for generic medicines and active pharmaceutical ingredients shield supply chains that American health policy cannot easily do without. The addition of cork and diamonds, small in dollar terms, signals that the comment process worked for member states such as Portugal and Belgium that lobbied hard for specific lines.
For American importers, the practical guidance is more complicated. The net-of-MFN mechanism means the additional duty owed on a European product depends on its existing tariff rate: a good with a 4 percent MFN rate pays 6 percent more, while a good already dutiable at 10 percent or higher pays no additional forced labor duty at all. Customs brokers spent the weekend recalculating landed costs line by line, and US Customs and Border Protection issued filing guidance requiring the new Chapter 99 headings to be declared in a specified trade remedy sequence. Goods that were already on the water before July 24 escape the new duty if entered before July 28, a deadline that arrives tomorrow.
European exporters’ reactions have tracked their exemption status. Aerospace and pharmaceutical companies, whose products escaped the duty entirely, have been conspicuously quiet. Producers of machinery, chemicals, wine and consumer goods, which face the full net 10 percent, are pressing national governments and the Commission to pursue the further exemptions the Commission spokesperson dangled. Industry associations in Germany, whose export model has absorbed the heaviest cumulative damage from the past two years of transatlantic tariff conflict, have been the loudest in warning that the bloc needs a durable settlement rather than a rolling series of reprieves. The pharmaceutical investigation aimed at Germany specifically sharpens that anxiety: it threatens to convert a health policy dispute over drug pricing into tariff exposure for the EU’s largest exporter.
Retaliation, or absorption?
The question hanging over Brussels is whether the bloc responds with more than words. The EU possesses an anti-coercion instrument adopted precisely for scenarios in which a trading partner uses economic pressure to influence European policy choices, and there have long been voices in the European Parliament urging the Commission to deploy it against American tariff actions. The Commission has so far declined, calculating that retaliation would shatter Turnberry entirely and invite the higher rates that the forced labor action pointedly kept in reserve.
The ratification question compounds the uncertainty. The European Parliament moved last year to clear the way for the trade pact, but the process stalled amid the tariff volatility that followed the February court ruling, leaving Turnberry in the same twilight status it has occupied since the handshake: politically operative, legally inchoate. That status cuts both ways. It spares the Commission a bruising ratification fight in a Parliament where suspicion of the bargain runs deep, but it also means every American action is tested against a text that was never fully consummated, giving both sides room to accuse the other of breaching commitments that were never precisely fixed.
The Google fine suggests Brussels has chosen a different currency for its responses: regulatory enforcement rather than tariffs. That approach lets the Commission argue, accurately, that its competition and digital rules apply to all companies regardless of nationality, while still imposing billions of dollars in costs on the American firms that dominate the sectors those rules govern. Washington, as Greer’s statement makes clear, no longer accepts the distinction. The administration treats DMA enforcement as trade policy by other means, and it has explicitly linked continued tariff restraint to the trajectory of European regulatory decisions.
That linkage sets up the autumn’s central dynamic. More DMA decisions against American platforms are expected, the German pharmaceutical investigation will mature, and the excess capacity inquiry will produce findings. Any of the three could trigger the next round. The Turnberry Agreement survived its first year, but it enters its second with both parties openly questioning the other’s good faith, and with the machinery of escalation already loaded on both sides of the Atlantic.
Investors have so far priced the friction as noise rather than rupture, and the relative calm in equity and currency markets through the week reflected a judgment that neither side wants the truce to fail. That judgment rests on an assumption worth stating plainly: that the Commission will keep its digital enforcement within bounds Washington can absorb, and that Washington will keep its tariff actions within the Turnberry ceiling Brussels can rationalize. Each side has now probed the outer edge of the other’s tolerance in the same week. The market’s equanimity assumes the probing stops.
For importers, exporters and investors, the operative advice is to treat the current calm as conditional. The 10 percent net rate and the exemption lists are creatures of a political bargain, not statute, and they can be revisited as quickly as they were written. Companies with transatlantic exposure should document their eligibility for the current exemptions, model landed costs at both the 12.5 percent tier and the 15 percent Turnberry ceiling, and watch the DMA docket in Brussels as closely as the Federal Register in Washington. The trade war between the United States and Europe has not resumed. But one year after Turnberry, both sides are rearming, and neither is pretending otherwise.