Insight
Three hard lessons for European trade by Aslak Berg, 10 November 2025 Global trade policy is now dominated by great power politics, putting Europe under pressure. The EU will have to accommodate the US, confront China and derisk from both. The European Union has had a difficult year in trade policy. On the one hand, the US, Europe’s largest trade partner and security guarantor, has forced the EU into an unequal trade agreement, imposing 15 per cent US tariffs on most European products while the EU removes all tariffs from US industrial goods. On the other hand, Chinese exports, supported by an economic model that aims to maximise production through an array of direct and indirect subsidies, are challenging and even outcompeting European manufacturers in key sectors, such as cars. Meanwhile, China is also aggressively leveraging its stranglehold on rare earths and other sectors to obtain concessions in trade disputes. Neither the US turn toward protectionism and away from WTO rules nor China’s aggressive behaviour are new developments. The EU had a foretaste of Trumpian trade policy in his first term. While the Union was able to avoid significant disruption then, it was no surprise that more tariffs would come, given Trump’s previous policies and campaign rhetoric. Similarly, China started using export restrictions as leverage against Japan in 2010. The EU has built some defences against these threats. It has maintained a Critical Raw Materials list since 2011 and last year passed the Critical Raw Materials Act (CRMA), designed to boost domestic supply of rare earths and other strategic materials. In 2023, it also passed the Anti-Coercion Instrument (ACI), the EU’s famous ‘trade bazooka’, designed to give the EU the tools it would need, such as restrictions on investment, trade and intellectual property, for an all-out defensive trade war when faced with Chinese or American pressure. The hope was that this would leave EU well-equipped to be the champion of the global rules-based trade order. Yet faced with overt pressure from both the US over tariffs and China over rare earths, the EU failed to activate the ACI, making that claim ring hollow. Instead, European interests are getting caught in the crossfire: the most recent crisis of Nexperia, the Chinese-owned chipmaker based in the CER INSIGHT: THREE HARD LESSONS FOR EUROPEAN TRADE 10 November 2025
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