The World Is Trading Around America. What It Means for US Investors.

The EU and the Philippines just agreed a free trade deal. It is one of about a dozen trade pacts the EU, China and India have closed in the past year, while Washington moved in the opposite direction. The near-term hit to US companies is small. The direction is not.

HeyTheo Research · Wednesday, September 23, 2026

Quick Read

• The news: on Tuesday the EU and the Philippines reached a preliminary agreement on a free trade deal that will eliminate tariffs on both sides and open Philippine government contracts to foreign bidders. Signing is expected next year.

• The pattern: in 12 months the EU has closed or signed deals with Indonesia, Mercosur, India and now the Philippines. India has closed deals with the UK, Oman, New Zealand and the EU. China's trade with Southeast Asia is now more than double its trade with the US.

• The US went the other way: its effective tariff rate rose from 2.3% to a 10.65% peak and sits at 6.7% after a court ruling, with a new 10% to 12.5% tariff on 60 economies since July 24.

• Near-term impact on US stocks: small, because most of these deals phase in over years. But US exporters are already losing ground in India and South America, while US companies that build inside these blocs gain.

On Tuesday, Sep 22, the European Commission said it had reached a "substantial agreement" with the Philippines on a free trade deal. It will eliminate tariffs, improve market access on both sides and open the Philippine government procurement market to foreign bidders.

Be precise about what was agreed. The Commission president posted that a deal was done, and officials clarified soon after that this is a preliminary agreement. The text still needs negotiating, and signing is expected next year.

On its own, this is a modest deal. The EU was the Philippines' fourth-largest trading partner in 2025, with 8.3% of its goods trade. Goods trade was €17.6 billion last year, and total trade including services runs near €30 billion (about $35 billion). Europe sells aircraft, pork and pharmaceuticals there. It buys semiconductors, integrated circuits and industrial machinery.

What matters is where it sits. It is one more link in a chain of trade deals that the world's other large economies are signing with each other, and not with the United States.

Source: European Commission, Government of India (PIB), CPTPP Commission, Penn Wharton Budget Model, law firm trade alerts. Accessed Sep 22, 2026.

Why Manila said yes now

Look at what the Philippines faces in each direction.

Selling to the US: since July 24, most Philippine goods pay a new 12.5% US tariff, stacked on top of existing duties. The Philippines is on the higher of the two rate lists.

Selling to the EU: once the deal is in force, tariffs go to zero on both sides.

That matters because the Philippine economy runs on electronics. Electronics exports rose 16% to $49.6 billion in 2025, more than half of everything the country sells abroad. Germany and the Netherlands are among the largest destinations outside Asia and North America.

The Philippines is also in preparatory talks to join the CPTPP, the 12-member successor to a Pacific trade pact the US helped design and then walked away from in 2017. Manila is hedging, openly.

Why the EU, China and India are moving so fast

Each of the three has its own reason. All three reasons point away from Washington.

The EU needs markets it can count on. After accepting a 15% ceiling on most of its exports to the US, Brussels went looking for growth elsewhere and signed faster than at any time in its history.

• Under the India deal, India will cut or remove tariffs on 96.6% of EU exports, including cars (now taxed at 110%), machinery (up to 44%), chemicals (up to 22%) and aircraft (up to 11%).

• The Mercosur deal removes duties on more than 90% of EU exports to Argentina, Brazil, Paraguay and Uruguay. Its trade provisions have applied since May 1.

China needs somewhere to send its goods. Its exports to the US fell 20% in 2025 to $420 billion. Exports to the EU rose 8.4% to $560 billion. Its overall trade surplus hit a record $1.19 trillion.

In the first eight months of 2026, China's trade with Southeast Asia reached about $878 billion, against $620 billion with the EU and $408 billion with the US. A 2025 upgrade to its free trade pact with Southeast Asia and the wider RCEP bloc are the plumbing behind that shift.

India is using the moment to open up. India has historically been one of the most protected big economies. In six months it signed or concluded deals with the UK, Oman, New Zealand and the EU, and its pact with the four EFTA countries (Switzerland, Norway, Iceland, Liechtenstein) came into force. It also agreed a framework for an interim deal with the US in February.

Meanwhile, the US went the other way

The US did not sign free trade agreements. It raised tariffs, then fought over them in court.

The average effective tariff rate, meaning customs duties collected as a share of import value, was 2.3% in January 2025. It climbed to 10.65% by September 2025. After the Supreme Court struck down the emergency-power tariffs on Feb 20, 2026, it drifted down to 6.7% by July.

That is not a retreat. On July 24 the administration replaced a temporary 10% global tariff with new Section 301 tariffs of 10% or 12.5% on 60 economies, covering about 99.4% of US imports. A second Section 301 investigation, into "excess capacity" in 16 economies, including China, the EU, India, Japan and Mexico, has not yet produced tariffs.

The US model is bilateral: tariffs first, then individual deals that cap them. The model everyone else is using is the opposite: remove tariffs among themselves, and leave the US out.

That creates a quiet disadvantage. When the EU and India cut tariffs to zero for each other, a US exporter selling into India faces the same tariff it always did, but its European competitor no longer does. Nothing changed in Washington, and the US company still lost ground.

Other blocs worth watching

Two groupings matter for US investors, and the US is in neither.

• CPTPP: 12 members, including Japan, Canada, Mexico, Australia, Vietnam and the UK. Costa Rica's entry was substantially agreed in May, Uruguay's is under way, and preparatory talks with Indonesia, the Philippines and the UAE began in June. The group now holds formal trade dialogues with both the EU and Southeast Asia. A deeper EU link would create the largest trading network in the world without either the US or China inside it.

• RCEP: the China-centered Asian bloc, in force since 2022. It is a large part of why China's trade with Southeast Asia keeps growing while its trade with the US shrinks.

The near-term impact on the US: small in dollars, real in direction

Be honest about the size. Most of these deals are not yet in force, and tariff cuts phase in over five to fifteen years. The EU-Philippines text is not even written, and signing is a year away. None of this will move a US company's earnings this quarter.

But three effects are already measurable.

1. US exporters lose ground where rivals get zero tariffs. India's tariffs of up to 110% on cars and up to 11% on aircraft will fall for European makers under the EU deal, but not for American ones unless a US agreement matches it. For BA, that means competing for Indian orders against a European rival with a growing tariff advantage. In Mercosur, European cars, chemicals and machinery have been getting cheaper since May 1.

2. American companies that build inside these blocs gain. A US chipmaker assembling and testing in the Philippines will be able to ship into Europe duty-free. For investors, the useful distinction is not "US versus the world." It is "made in America" versus "made by American companies." The second group gains options; the first loses access.

3. China's diverted exports keep pressure on prices everywhere else. Chinese goods that no longer go to the US are going to Southeast Asia, Europe, Africa and Latin America. That is where many US multinationals also sell, and they now compete there against cheaper Chinese supply.

The broader thread runs through our recent notes. The China note showed how Chinese factory output feeds global prices and yields. The Trump-Xi note laid out what is on the table when the two leaders meet on Thursday. This week's summit is the one venue where the US and China could reset some of this, and both sides have indicated only modest ambitions.

What to watch, with dates

• Thu, Sep 24: Trump-Xi meeting in Washington, after Xi's arrival on Wednesday. Watch for any tariff cuts beyond the reported $30 billion each way.

• Mid-October: China's September trade data. Watch whether exports to the US keep recovering or the Southeast Asia share keeps climbing.

• Before year-end: the EU aims to sign its deals with India, Indonesia and Australia.

• Pending, no date: US tariffs from the "excess capacity" investigation into 16 economies. This is the single biggest swing factor for US importers.

• Later in 2026: CPTPP ministers meet again on new members, including the Philippines.

The rules HeyTheo tracks

• Basket: group covered US names that export from US soil against those that manufacture abroad, and watch whether the gap widens on trade headlines.

• Triggers: flag unusual moves on USTR announcements, the Sep 24 summit and China's monthly trade data.

• Money flow: watch whether big money rotates toward companies with production inside Europe and Asia.

• Ask Theo: pull the bull case, bear case and what to watch on any covered exporter before its next report.

• Check the rule behind any trigger before acting on it. You trade through your own broker; HeyTheo helps you decide.

The Manifest

• The EU, China and India are cutting tariffs with each other. The US is setting tariffs on everyone.

• The Philippines signed because selling to Europe is about to be duty-free, while selling to the US now carries a 12.5% tariff.

• The near-term dollar impact on US companies is small. Most deals phase in over years.

• The direction is not small. Every zero-tariff deal the US is not part of makes US-made goods relatively more expensive.

• For investors, the split that matters is made in America versus made by American companies.

FAQs

What is in the EU-Philippines free trade deal?

The EU and the Philippines reached a preliminary agreement on Sep 22, 2026. It will eliminate tariffs on both sides, improve access for exporters, service providers and investors, and open Philippine government procurement to foreign bidders. The text still needs negotiating, and signing is expected next year.

Why are the EU, China and India signing so many trade deals?

The EU wants markets it can rely on after accepting a 15% ceiling on most exports to the US. China needs new buyers as its exports to the US fell 20% in 2025. India is using the moment to open a historically protected economy.

Do these trade deals hurt US companies?

Not much in the near term, because most deals are not in force and phase in over years. Over time, US exporters lose ground in markets where competitors get zero tariffs and they do not, while US companies producing inside those markets can benefit.

What is the US effective tariff rate now?

About 6.7% as of July 2026, up from 2.3% in January 2025. It peaked near 10.65% in September 2025 before the Supreme Court struck down the emergency-power tariffs in February 2026.

Is the US part of the CPTPP or RCEP?

No. The US withdrew from the original Pacific pact in 2017, and RCEP is centered on China and Southeast Asia. The Philippines, Indonesia and the UAE began preparatory talks to join the CPTPP in June 2026.

Sources

Reuters, European Commission, Government of India (PIB), Penn Wharton Budget Model, The Budget Lab at Yale, China General Administration of Customs, CKGSB Knowledge, Trading Economics, CPTPP Commission, SEIPI, Philippine Statistics Authority, Sullivan & Cromwell, Morgan Lewis, Honigman.

Disclaimer: HeyTheo is a research and education platform, not an investment adviser or broker-dealer. Nothing here is advice to buy, sell, or hold any security. You trade through your own broker; HeyTheo helps you decide. Backtested results are hypothetical and do not guarantee future returns. References to governments, officials, or policies are for market context only and are not political endorsements. All investing involves risk, including loss of principal. Data is as of the dates noted.