Between Two Fires: How the EU was drawn into conflict with both the US and China

The year 2025 will go down in the history of the European Union as a turning point in its development as a political and economic bloc. Russia's military campaign in Ukraine has forced EU leaders to launch reforms of their own military-industrial complex and start building a collective defense system outside NATO. And disagreements over trade policy with the U.S. and China are forcing European bureaucrats to stop their years-long search for compromises and partnerships where they can openly compete in trade and production.

On July 24, the 25th EU-China summit will start in Beijing. The European Union will be represented there by European Council President António Costa and European Commission President Ursula von der Leyen. Official documents from the European Council say the event marks the 50th anniversary of the establishment of diplomatic relations between the EU and China. And its aim is to "engage ... at the highest level and emphasize the importance the EU attaches to a fair and balanced relationship with China."

The summit was preceded by a meeting on July 2 between European diplomacy chief Kai Kallas on the European side and Chinese Foreign Minister Wang Yi. Ironically, their dialog took place on the sidelines of the 13th session of the two countries' Strategic Dialogue. The number confirmed its bad reputation: instead of dialog, there was an exchange of impossible demands and instructions;

Brussels asked Beijing not to limit exports of rare earth metals to European buyers and immediately demanded an immediate halt to any support for Russia's military-industrial complex. The Chinese Foreign Minister also received assurances that the EU is committed to the "one China" policy. But he also rejected any unilateral attempts to change the status quo with regard to Taiwan, including "by force or coercion.

The European press assessed such a strategic dialog as a communication with zero result. Journalists, most likely, relied on the last EU-China summit in 2023. That summit ended with a whole set of formulations in the final communiqué, of which only one is valuable in a practical sense: "The European Union will seek to ensure a level playing field for balanced, reciprocal and mutually beneficial trade and economic relations;

But even this promise has not been kept: The EU and China now have to discuss the issues of tariffs and declared prices for electric cars from China (now they are subject to duties of up to 43.5% of the customs value) and retaliatory duties on strong alcohol from Europe;

And in 2025, a political component was added to the economic differences. The dialog with China around positions on Ukraine has gone beyond the 2023 formulations. Previously, Brussels demanded that Beijing press Russia to withdraw its troops from Ukraine, but now each new package of EU sanctions imposes additional restrictions on trade and transportation of energy resources from Russia, which cannot but cause a negative reaction in Beijing (one of the buyers of those very energy resources).

A week after the meetings in Beijing, on August 1, the EU will face the denouement of trade negotiations with the United States. On that day, U.S. President Donald Trump has previously said the states will impose 30 percent duties on European goods. According to data from the Financial Times, Trump is demanding new concessions from the European Union to reach a new trade agreement. Until now, it had been assumed that the starting point for determining the amount of duties would be a 10 percent rate - which is what is currently in place for all goods imported into the United States. But now, as the FT writes, the White House is already thinking about 15-20%.

Unlike Beijing, Washington is willing to discuss the issue in a deal mode. In particular, Donald Trump is not against making exceptions for medicines (one of the issues on his domestic agenda is controlling the rise in prescription drug prices) and a list of high-tech equipment from the EU. In response, Brussels agrees to increased energy purchases from U.S. suppliers and has shown high interest in chips from the United States.

But just in case, European officials have already prepared their own set of countermeasures. According to sources of the WSJ, they include restrictions on digital services of US companies and exclusion of US manufacturers' products from EU state tenders.

The Old World is ready to quickly impose 30 percent duties on more than $100 billion worth of U.S. exports (about a third of all shipments to the EU from the United States), Writes Bloomberg. In particular, airplanes, bourbon and cars could fall under them.

Europe's main difficulty in negotiating with America is its strong connectivity. The same US companies sell a significant amount of services and goods through subsidiaries in the EU (companies in Ireland). And industrial companies in Germany have long established subsidiaries in the US. Because of this, it is impossible to predict how the introduction of duties will affect mutual trade and the final cost of different products for consumers.

It is even harder to envision how the trade war will be fought if Trump escalates and imposes base tariffs above 15-20%. In such a case, the EU can compensate for the losses through levies and inspections against technology giants. 

The experience of increased regulation and billions of dollars in fines is already existing. On April 23, 2025, the European Commission ruled that Apple violated anti-steering obligations by restricting apps in the App Store from directing users to alternative payment methods outside its ecosystem and Meta from restricting consumers' right to choose a service that uses a limited amount of personal data. The European Commission fined Apple and Meta €500 million and €200 million respectively.

Despite the high risk of a negative outcome of negotiations with Beijing and Washington, the year 2025 claims to be a turning point in the history of the European Union. The association, whose construction began in the 1950s of the 20th century, is based on a policy of openness and good neighborliness for the prosperity of all EU members;

However, the future of the project of a united Europe will be determined by quite different tasks: it is increased defense capability and protection of economic interests in new and foreign markets. The two historical engines of the EU - France and Germany - have already started working together on a new common strategy for the Union;

For the current French President Emmanuel Macron, this means technological independence from the rest of the world, the ability of European (primarily French) businesses to be efficient and advanced. We are talking about both companies in the service of the military-industrial complex and businesses that create new markets and jobs;

For German Chancellor Friedrich Merz, it is a policy of "restarting" the German economy, whose condition has only been exacerbated by the consequences of the war launched by Vladimir Putin in Ukraine (primarily due to a sharp rise in energy prices and a change of suppliers).

In foreign policy, the EU is moving away from compromise;

If we look at the history of the EU's relations with the US and China over the past five years, we can say that the sides have described a circle and returned to the same positions from which they started in 2019. 

Then the U.S. and EU investigated possible support measures for Boeing to the detriment of Airbus interests, and today the EU threatens duties on aircraft from North America. 

In 2020, Brussels and Beijing finalized negotiations on a comprehensive Investment Agreement, which envisioned the admission of Chinese companies to the European market and guarantees for EU investors in China. Five years later, in June 2025, the EU banned Chinese companies from participating in public procurement of medical equipment worth more than 5 million euros.

From the outside, such going around in circles can be called unproductive bilateral relations, because the parties have not achieved the goals of an effective mutually beneficial trade policy;

On the other hand, it is enough to simply recognize that the conscious policy of seeking compromises and the strategy of mutually beneficial cooperation did not work;

No one can predict how quickly EU leaders will build a new foreign economic policy, but the fact that they cannot ignore this task is good news for all Europeans;

And for investors, who are used to complaining about the EU's sluggishness and lack of courage compared to Chinese and American competitors on the global market.

This article was AI-translated and verified by a human editor