· 4 min read
Stability at a cost
In Scotland on Sunday, a meeting between Ursula von der Leyen and Donald Trump averted a potentially destructive trade war between the EU and the United States. But Brussels accepted a steep compromise: 15% tariffs on the majority of European goods in exchange for the suspension of more aggressive measures. “We prefer stability to total unpredictability,” commented Trade Commissioner Maroš Šefčovič. The deal marks a symbolic win for Washington’s rhetoric and allows the Commission to buy time.
Energy and defence
Among the headline announcements is a European pledge to increase imports of US energy — fossil and nuclear — worth $750 billion over three years, invest $600 billion in the American economy, and expand purchases of US-made military equipment. However, these commitments remain more political than operational, given the limits of the Commission’s legal competences for energy procurement or defence acquistions.
The $250 billion annual figure appears overly optimistic: in 2024, total EU fossil energy imports barely exceeded $400 billion. In 2020, China committed to increasing its purchases of US goods by $200 billion under a similar deal. In reality, only about 57% of the total imports—and just 36% of fossil fuel products—were actually delivered. The targets were never met, and the agreement was quietly shelved without consequences.
The EU-China summit
Just days earlier, on 24 July, Beijing hosted the EU–China summit marking 50 years of diplomatic relations between the two sides. Amid rising geopolitical tensions and deepening economic imbalances, the meeting produced some positive outcomes: a preliminary understanding on managing industrial overcapacity and an operational agreement on rare earths trade — critical materials for energy transition and defence. A step aligned with Brussels’ broader strategy of global trade and supply diversification.
Major EU red lines remain — in particular, China's position on Ukraine and Russia, and the substantial bilateral trade imbalance ($305 billion in 2024). Yet the summit signalled openness on key dossiers and dialogue.
The climate convergence
At the heart of any potential rebalancing lies the shared urgency to reduce energy dependency. For both blocs, net fossil importes, this translates into accelerating the green transition. A convergence is emerging on the need for common rules to govern the economic transformation driven by decarbonisation. The joint climate communiqué commits both parties to “accelerate swift action at scale and at all levels, from local to global”, with openings on renewables, low-carbon technologies, methane control and carbon markets.
While notable differences persist, the EU and China share a strategic interest in safeguarding the multilateral, rule-based governance system — now under severe strain from shifting power dynamics — as well as promoting green and digital corridors, and countering coercive economic measures. Multilateralism is an economic imperative for both capitals.
An enhanced mechanism for rare earths
At the post-summit press conference, von der Leyen announced an agreement on an “enhanced export supply mechanism” for rare earths, to be activated in the event of bottlenecks. The details of the agreement are still to be made public. However, this is seen as a critical first step to reducing Europe’s 90% dependency on Chinese-refined materials.
For the EU, the potential of China as an industrial partner in emerging sectors is evident, provided there is genuine technology transfer and know-how sharing. Areas of interest include renewables, artificial intelligence, sustainable agriculture, circular economy, and advanced molecules. Joint ventures in these fields offer a concrete pathway to boost European competitiveness while aligning with environmental goals. The key is reasoned engagement, not withdrawal. Beijing’s steady course and climate targets provide a foundation for stable cooperation and a tangible opportunity for European firms in the Chinese market, provided that measures to ensure reciprocity are actionable and enforceable.
Overcapacity and reciprocity
On the industrial front, Xi Jinping has already called for measures to cool the price war in high-tech sectors — a dynamic increasingly detrimental to Chinese producers themselves. According to EU officials, for the first time Beijing has agreed to the launch of a structured dialogue in key areas such as electric vehicles, steel, and new energy technologies.While not yet a formal mechanism, the political understanding is seen in Brussels as a vital step toward a more mutually balanced economic relationship. China’s rapid industrial shift is generating rising pressures on European manufacturing: in 2024, the EU’s trade deficit with China reached $305 billion.
Quietly resurfacing is the discussion on the Comprehensive Agreement on Investment (CAI), negotiated in 2020 but never ratified. The deal, if coupled with progress on transparency and reciprocity, the leitmotiv of the European Chamber of Commerce in China, could provide a ready-made framework for greener and more balanced trade.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
