The message from Capitol Hill on both sides of the aisle is clear: Get ready for U.S. relations with China to spiral all over again in the new year. The one-year trade truce brokered in October between President Donald Trump and Chinese leader Xi Jinping is already looking shaky. And lawmakers are preparing to reup clashes over trade, Taiwan and cyber-intrusions when they return in January. “It’s like a heavyweight fight, and we’re in that short time period in-between rounds, but both sides need to be preparing for what is next after the truce,” Rep. Greg Stanton (D-Ariz.), a member of the House Select Committee on China, said in an interview. POLITICO talked to more than 25 lawmakers, including those on the House Select Committee on China, the House Foreign Affairs Committee’s East Asia subcommittee and the Congressional Executive Commission on China, for their views on the durability of the trade treaty. Both Republicans and Democrats warned of turbulence ahead. More than 20 of the lawmakers said they doubt Xi will deliver on key pledges the White House said he made in October, including reducing the flow of precursor chemicals to Mexico that cartels process into fentanyl and buying agreed volumes of U.S. agricultural goods. “China can never be trusted. They’re always looking for an angle,” Sen. Thom Tillis (R-N.C.) said. That pessimism comes despite an easing in U.S.-China tensions since the Trump-Xi meeting in South Korea. The bruising cycle of tit-for-tat tariffs that briefly hit triple digits earlier this year is currently on pause. Both countries have relaxed export restrictions on essential items (rare earths for the U.S., chip design software for China), while Beijing has committed to “expanding agricultural product trade” in an apparent reference to the suspension of imports of U.S. agricultural products it imposed earlier this year. This trend may continue, given that Trump is likely to want stability in the U.S.-China relationship ahead of a summit with Xi planned for April in Beijing. “We’re starting to see some movement now on some of their tariff issues and the fentanyl precursor issue,” Sen. Steve Daines (R-Mont.) said. But a series of issues have been brushed aside in negotiations or left in limbo — a status quo the Trump administration can only maintain for so long. The U.S.-China trade deal on rare earths that Bessent said the two countries would finalize by Thanksgiving remains unsettled. And the White House hasn’t confirmed reporting from earlier this month that Beijing-based ByteDance has finalized the sale of the TikTok social media app ahead of the Jan. 23 deadline for that agreement. “The idea that we’re in a period of stability with Beijing is simply not accurate,” said Sen. Jeanne Shaheen (D-N.H.), ranking member of the Senate Foreign Relations Committee. Shaheen has been sounding the alarm on China’s national security threats since she entered the Senate in 2009. But even some lawmakers who have been more open to engagement with Beijing — such as California Democratic Reps. Ro Khanna and Ami Bera — said that they don’t expect the armistice to last. The White House is more upbeat about the prospects for U.S.-China trade ties. “President Trump’s close relationship with President Xi is helping ensure that both countries are able to continue building on progress and continue resolving outstanding issues,” the White House said in a statement, adding that the administration “continues to monitor China’s compliance with our trade agreement.” It declined to comment on the TikTok deal. Still, the lawmakers POLITICO spoke with described four issues that could derail U.S.-China ties in the New Year: A SOYBEAN SPOILER U.S. soybean farmers’ reliance on the Chinese market gives Beijing a powerful non-tariff trade weapon — and China doesn’t appear to be following through on promises to renew purchases. The standoff over soybeans started in May, when China halted those purchases, raising the prospect of financial ruin across farming states including Illinois, Iowa, Minnesota, Nebraska and Indiana — key political constituencies for the GOP in the congressional midterm elections next year. The White House said last month that Xi committed to buying 12 million metric tons of U.S. soybeans in November and December. But so far, Beijing has only purchased a fraction of that agreed total, NBC reported this month. “What agitates Trump and causes him to react quickly are things that are more domestic and closer to home,” Rep. Jill Tokuda (D-Hawaii) said. China’s foot-dragging on soybean purchases “is the most triggering because it’s hurting American farmers and consumers, so that’s where we could see the most volatility in the relationship,” she said. That trigger could come on Feb. 28 — the new deadline for that 12 million metric ton purchase, which Treasury Secretary Scott Bessent announced earlier this month. The Chinese embassy in Washington declined to comment on whether Beijing plans to meet this deadline. The White House said one of the aspects of the trade deal it is monitoring is soybean purchases through this growing season. THE TAIWAN TINDERBOX Beijing’s threats to invade Taiwan are another near-term potential flashpoint, even though the U.S. hasn’t prioritized the issue in its national security strategy or talks between Xi and Trump. China has increased its preparations for a Taiwan invasion this year. In October, the Chinese military debuted a new military barge system that addresses some of the challenges of landing on the island’s beaches by deploying a bridge for cargo ships to unload tanks or trucks directly onto the shore. “China is tightening the noose around the island,” said Rep. Ro Khanna (D-Calif.), who joined a bipartisan congressional delegation to China in September and returned calling for better communications between the U.S. and Chinese militaries. Some of the tension around Taiwan is playing out in the wider region, as Beijing pushes to expand its military reach and its influence. Chinese fighter jets locked radar — a prelude to opening fire — on Japanese aircraft earlier this month in the East China Sea. “There is a real chance that Xi overplays his hand on antagonizing our allies, particularly Australia and Japan,” Rep. Seth Moulton (D-Mass.) said. “There is still a line [China] cannot cross without making this truce impossible to sustain.” The U.S. has a decades-long policy of “strategic ambiguity” under which it refuses to spell out how the U.S. would respond to Chinese aggression against Taiwan. Trump has also adhered to that policy. “You’ll find out if it happens,” Trump said in an interview with 60 Minutes in November. MORE EXPORT RESTRICTIONS ON THE WAY Beijing has eased its export restrictions on rare earths — metallic elements essential to both civilian and military applications — but could reimpose those blocks at any time. Ten of the 25 lawmakers who spoke to POLITICO said they suspect Beijing will reimpose those export curbs as a convenient pressure point in the coming months. “At the center of the crack in the truce is China’s ability to levy export restrictions, especially its chokehold on the global supply of rare earths and other critical minerals,” Rep. André Carson (D-Ind.) said. Others are worried China will choose to expand its export controls to another product category for which it has market dominance — pharmaceuticals. Beijing supplies 80 percent of the U.S. supply of active pharmaceutical ingredients — the foundations of common drugs to treat everything from high blood pressure to type 2 diabetes. “Overnight, China could turn off the spigot and many basic pharmaceuticals, including things like aspirin, go away from the supply chain in the United States,” Rep. Nathaniel Moran (R-Texas) said. China restarted exports of rare earths earlier this month, and its Commerce Ministry pledged “timely approval” of such exports under a new licensing system, state media reported. Beijing has not indicated its intent to restrict the export of pharmaceuticals or their components as a trade weapon. But the U.S.-China Economic and Security Review Commission urged the Food and Drug Administration to reduce U.S. reliance on Chinese sources of pharmaceuticals in its annual report last month. The Chinese embassy in Washington didn’t respond to a request for comment. GROWING CHINESE MILITARY MUSCLE China’s drive to develop a world-class military that can challenge traditional U.S. dominion of the Indo-Pacific could also derail relations between Washington and Beijing in 2026. China’s expanding navy — which, at more than 200 warships, is now the world’s largest — is helping Beijing show off its power across the region. The centerpiece of that effort in 2025 has been the addition of a third aircraft carrier, the Fujian, which entered into service last month. The Fujian is two-thirds the size of the USS Gerald R. Ford carrier. But like the Ford, it boasts state-of-the-art electromagnetic catapults to launch J-35 and J-15T fighter jets. The Trump administration sees that as a threat. The U.S. aims to insulate allies and partners in the Indo-Pacific from possible Chinese “sustained successful military aggression” powered by Beijing’s “historic military buildup,” Defense Secretary Pete Hegseth said earlier this month at the Reagan National Defense Forum. Five lawmakers said they see China’s increasingly aggressive regional military footprint as incompatible with U.S. efforts to maintain a stable relationship with Beijing in the months ahead. “We know the long-term goal of China is really economic and diplomatic and military domination around the world, and they see the United States as an adversary,” Moran said. Daniel Desrochers contributed to this report.

A pair of documents laying out the Trump administration’s global security strategy have been delayed for weeks due in part to changes that Treasury Secretary Scott Bessent insisted on concerning China, according to three people familiar with the discussions on the strategies. The documents — the National Security Strategy and National Defense Strategy — were initially expected to be released earlier this fall. Both are now almost done and will likely be released this month, one of the people said. The second person confirmed the imminent release of the National Security Strategy, and the third confirmed that the National Defense Strategy was coming very soon. All were granted anonymity to discuss internal deliberations. The strategies went through multiple rounds of revisions after Bessent wanted more work done on the language used to discuss China, given sensitivity over ongoing trade negotiations with Beijing and the elevation of the Western Hemisphere as a higher priority than it had been in previous administrations, the people said. The National Security Strategy has been used by successive administrations to outline their overall strategic priorities from the economic sphere to dealing with allies and adversaries and military posture. The drafting goes through a series of readthroughs and comment periods from Cabinet officials in an attempt to capture the breadth of an administrations’ vision and ensure the entire administration is marching in the same direction on the president’s top issues. The administration has been involved in sensitive trade talks with Beijing for months over tariffs and a variety of trade issues, but the Pentagon has maintained its position that China remains the top military rival to the United States. The extent of the changes after Bessent’s requests remains unclear, but two of the people said that Bessent wanted to soften some of the language concerning Chinese activities while declining to provide more details. Any changes to one document would require similar changes to the other, as they must be in sync to express a unified front. It is common for the Treasury secretary and other Cabinet officials to weigh in during the drafting and debate process of crafting a new strategy, as most administrations will only release one National Security Strategy per term. In a statement, the Treasury Department said that Bessent “is 100 percent aligned with President Trump, as is everyone else in this administration, as to how to best manage the relationship with China.” The White House referred to the Treasury Department. Trump administration officials have alternately decried the threat from China and looked for ways to improve relations with Beijing. Defense Secretary Pete Hegseth is expected to deliver a speech on Friday at the Reagan Library in Simi Valley, California, on Pentagon efforts to build weapons more quickly to meet the China challenge. At the same time, Hegseth is working with his Chinese counterpart, Adm. Dong Jun, to set up a U.S.-China military communication system aimed to prevent disagreements or misunderstandings from spiraling into unintended conflict in the Indo-Pacific. Bessent told the New ‍York Times Dealbook summit on Wednesday that China was on schedule to meet the pledges it made under a ‌U.S.-China trade agreement, including purchasing 12 million metric tons of soybeans by February 2026. “China is on track to ‍keep every ⁠part of the deal,” ⁠he said. Those moves by administration officials are set against the massive Chinese military buildup in the Indo-Pacific region and tensions over Beijing’s belligerent attitude toward the Philippines, where Beijing and Manila have been facing off over claims of land masses and reefs in the South China Sea. The U.S. has been supplying the Philippines with more sophisticated weaponry in recent years in part to ward off the Chinese threat. China has also consistently flown fighter planes and bombers and sailed warships close to Taiwan’s shores despite the Taiwan Relations Act, an American law that pledges the U.S. to keep close ties with the independent island. The National Security Strategy, which is put out by every administration, hasn’t been updated since 2022 under the Biden administration. That document highlighted three core themes: strategic competition with China and Russia; renewed investment and focus on domestic industrial policy; and the recognition that climate change is a central challenge that touches all aspects of national security. The strategy is expected to place more emphasis on the Western Hemisphere than previous strategies, which focused on the Middle East, counterterrorism, China and Russia. The new strategy will include those topics but also focus on topics such as migration, drug cartels and relations with Latin America — all under the umbrella of protecting the U.S. homeland. That new National Defense Strategy similarly places more emphasis on protecting the U.S. homeland and the Western Hemisphere, as POLITICO first reported, a choice that has caused some concern among military commanders. Both documents are expected to be followed by the “global posture review,” a look at how U.S. military assets are positioned across the globe, and which is being eagerly anticipated by allies from Germany to South Korea, both of which are home to tens of thousands of U.S. troops who might be moved elsewhere.

BUSAN, South Korea — President Donald Trump on Thursday said he had “an amazing meeting” with Chinese leader Xi Jinping, appearing to tamp down tensions that had been building for months. “Zero, to 10, with 10 being the best, I’d say the meeting was a 12,” Trump told reporters aboard Air Force One, shortly after he left South Korea on his way back to Washington. “A lot of decisions were made … and we’ve come to a conclusion on very many important points.” The agreement, according to Trump, includes a commitment from China to purchase soybeans from American farmers, curb the flow of fentanyl and postpone its export restrictions on rare earths, which are used in everything from iPhones to military equipment. “There is no road block at all on rare earth,” Trump said. “Hopefully, that will disappear from our vocabulary for a little while.” Trump said he intended to immediately lower tariffs on Chinese exports to 47 percent from 57 percent. The result pulls the two nations back from the brink and should induce a significant sigh of relief from capital markets around the world. Details remain sparse and there have been false starts and resets before, but Trump said he could sign an agreement “pretty soon” and that few stumbling blocks remained. Trump also said he plans to visit China in April and that Xi would travel to the United States after that. This was Trump and Xi’s first face-to-face meeting since the G20 summit in Osaka, Japan in June 2019, when the two countries were also in the middle of a trade war. Thursday’s summit in South Korea followed months of renewed tensions that have impeded trade between the two countries, despite several announced truces. While Trump has ratcheted up tariffs on China — at one point as high as 145 percent — and tightened export controls on high-tech goods, Beijing has responded with its own devastating pressure campaign. That includes reducing purchases of American farm goods, which fell by more than 50 percent in the first seven months of 2025. U.S. soybeans farmers, who exported a record $18 billion worth of their crop to China in 2022, have been hit particularly, with just $2.4 billion in shipments to China in January through July. Beijing also imposed new export controls on rare earth materials. Earlier this month, China added five more rare earth elements to its control list and, much more controversially, outlined a plan requiring foreign companies that use even tiny amounts of Chinese-sourced rare earths to obtain a license from Beijing to export their finished products. U.S. officials described that move as an intolerable attempt by China to control global supply chains, and Trump threatened new 100 percent tariffs to take effect on Nov. 1. But it appears both sides wanted to avoid that kind of escalation. During the weekend, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer, after meeting with Chinese Vice Premier He Lifeng in Malaysia, said they believed Beijing was prepared to delay its rare earth restrictions for a year, make “substantial” purchases of American farm goods and attempt to curb shipments of fentanyl precursor chemicals to the U.S.

President Donald Trump heads into a historic meeting with Chinese leader Xi Jinping facing a delicate test: projecting strength against America’s top adversary without triggering another economic shock at home. The high-stakes encounter, the first between the two men in more than six years, comes after months of tariff feints and escalating rhetoric that have rattled markets and strained global supply chains — and at a moment when Trump is eager to prove that his economic nationalism can still deliver concrete wins. Administration officials are voicing confidence that Trump and Xi will step back from the brink of a second trade war when they meet Thursday morning local time in South Korea, but even a small misstep could send markets spiraling, as they did when Trump last imposed triple-digit tariffs on Chinese imports in April. Markets have grown accustomed to Trump’s tariff back-and-forths over the last 10 months, but investors remain queasy over the specter of new levies, like the 100 percent the president is now threatening. Trump’s favorite negotiating tool — tariffs — hasn’t worked on China the way it has in other places. While the vast majority of countries rushed to notch trade agreements, Beijing has responded with not only its own tariffs but an effective embargo on U.S. soybean purchases and sweeping export controls that underscore the near-monopoly the country continues to have over rare earth materials, which are used in everything from iPhones to military equipment. Trump has raised expectations for a successful confab, telling reporters multiple times in the last week that his meeting with Xi is “going to work out very well.” “I think we’re going to have a deal,” Trump said Wednesday in South Korea, his third stop in a weeklong Asia trip. “That’s really a great result that’s better than fighting or going through all sorts of problems. The world is watching.” The president is likely to brandish any concessions he secures from Xi as proof that his pressure campaign is working. “I think the president is very focused on reaching an equilibrium in the economic relationship where we stop the cycle of escalation and we get to some sort of at least temporary or partial resolution to some of the immediate economic headwinds,” said Alex Gray, who served as National Security Council chief of staff and deputy assistant to the president during the first Trump administration. A reset of the U.S.-China relationship to where it was before the latest spat would give both leaders a way to claim victory to their domestic audiences. China’s embargo of U.S. soybean exports has been a persistent pressure point for Trump as frustrated farmers complain that Washington bailed out Argentina but has left them waiting for relief, a political vulnerability the president is eager to neutralize. And for Xi, the talks offer a chance to ease mounting economic pressure at home, where sluggish growth and capital flight have underscored the limits of Beijing’s self-reliance strategy. The two sides have quietly negotiated for months with little tangible progress, save for a May session in Geneva that produced a limited accord that ended a brief round of tit-for-tat tariffs between the two countries. Something similar could happen again — a limited agreement that deescalates the latest round of tensions but does little to meaningfully address the U.S.’s longstanding frustrations over its trade imbalance with China. “I think it will be a fragile truce on trade,” said Matt Pottinger, a former deputy national security adviser during the first Trump administration, now chairman of the China program at the Foundation for Defense of Democracies. “None of the systemic problems go away, but the two sides will probably agree to kick the can into next year before either pursues further escalation.” The “Phase One” trade pact that the U.S. and China signed in January 2020 called for hundreds of billions of dollars in additional Chinese purchases of U.S. goods and tougher intellectual-property enforcement. Yet China never met its purchase targets, which it blamed on the Covid-19 pandemic. Although former President Joe Biden maintained and expanded Trump’s tariffs on Beijing, Trump administration officials and congressional Republicans have accused him of failing to aggressively enforce the pact. The U.S. Trade Representative’s Office last week launched an investigation into what it describes as the country’s “apparent failure” to comply with the deal. Treasury Secretary Scott Bessent, following meetings in Kuala Lumpur with Chinese Vice Premier He Lifeng, outlined the “framework” of an agreement in which China resumes its purchases of soybeans and delays implementation of new export controls, and the U.S. agrees not to impose new tariffs. China’s foreign ministry, in a statement ahead of the meeting, said it is “possible to stabilize and advance the bilateral relationship as long as the two sides fully implement the important common understandings reached by the two heads of state.” China also purchased multiple ships of American soybeans in advance of the meeting, a move that Agriculture Secretary Brooke Rollins in a post on X called “a great start.” Bessent has also said that Beijing will, as part of the framework, agree to new provisions on the precursor chemicals used to manufacture fentanyl, something Trump has been pushing for since he slapped a first round of tariffs on China in February. It’s a politically potent issue for Trump, who has repeatedly accused Beijing of failing to curb the flow of fentanyl into the U.S., but China hawks are skeptical that the commitment will be substantial or long-lasting. “Our attitude in the first administration was ‘don’t bother with talks.’ Talks only work in Beijing’s favor because whatever comes out of these conversations, whatever agreement you come up with, will only be valid in so long as it favors the Chinese side,” said a first-term Trump official, granted anonymity to discuss internal conversations. “As soon as it becomes inconvenient, they walk away from it.’” The official said that while Trump stands to look “like a senior diplomat, a statesman” in the meeting, Xi stands to get more out of it “if he can be made to look strong to his people, if the outcome is yet another meaningless trade deal.” Other former Trump officials worry that the president could be persuaded to make significant concessions, such as lifting export controls on semiconductor chips or the equipment used to manufacture them. Trump faced criticism in August for striking a deal with Nvidia to allow the sale of certain chips to China. “The base case is, they muddle through and they have a meeting and then they agree to have more meetings and more trade talks,” said Liza Tobin, who served as National Security Council director for China during the first Trump administration and the start of the Biden administration. “The worst case scenario for the United States is Trump concedes a whole lot of these real concessions.” But Trump, who likes to maintain maximum negotiating leverage heading into meetings with world leaders, hasn’t signed off on the framework Bessent has outlined publicly, telling reporters on Air Force One earlier this week that “nothing has been agreed to yet.” Trump has also teased that he “might” sign a final deal on TikTok on Thursday. The meeting comes as Trump’s tariff strategy is facing scrutiny at home. Five Republican senators joined Democrats on Wednesday against Trump’s 50 percent tariff on Brazil, a largely symbolic vote on a measure that the House has said it won’t take up even as it represents a rare GOP rebuke of Trump’s policies. Even if the framework holds, it would represent a narrow truce rather than a structural shift. It’s likely to sidestep the deeper disputes that have long defined the U.S.-China relationship as Trump officials continue to pressure China to curb industrial subsidies, improve market access for U.S. companies and curb China’s control of key supply chains. It’s also unclear to what extent China will push a conversation about Taiwan. Trump, asked Friday about whether he’s open to changing U.S. policy on Taiwan, said he didn’t want to talk about it because he didn’t “want to create any complexity” for an “already complex” trip. Pottinger, the former deputy national security adviser, said that the president’s style is “to maintain an open channel to the top decision makers within adversarial states.” But, he added, Trump “understands that Beijing coercing Taiwan would do serious harm to U.S. economic and national security and would be a stain on President Trump’s record.” Recent trade accords with southeast Asian countries — including Vietnam, Thailand, Cambodia and Malaysia — may give Washington a stronger hand heading into the meeting, showing allies that the U.S. is trying to chip away at Beijing’s regional grip. The U.S. has also in the last week inked agreements with Australia and Japan to collaborate on establishing a rare earth supply chain outside of China, and signed memorandums with Thailand and Malaysia that could lead to rare earth exports from both countries. “It is really important for them to continue to lock up these deals in the Indo Pacific, because with all of this, if the outcome is that these countries begin to tilt even more towards China, economically and commercially than they already are, that’s a terrible outcome for the United States,” said Michael Sobolik, a senior fellow at Hudson Institute and former aide to Sen. Ted Cruz (R-Texas). Ari Hawkins, Diana Nerozzi and Doug Palmer contributed to this report.

BRUSSELS — The ink is still drying on a leaders’ statement formalizing a tariff deal between the EU and the United States, and President Donald Trump is already threatening to tear it up.  In another punch against the EU, Trump threatened Monday to impose further tariffs on countries whose digital rules, in his view, discriminate against American companies.   “I put all Countries with Digital Taxes, Legislation, Rules, or Regulations, on notice that unless these discriminatory actions are removed, I, as President of the United States, will impose substantial additional Tariffs on that Country’s Exports to the U.S.A., and institute Export restrictions on our Highly Protected Technology and Chips,” he wrote on Truth Social. The Trump administration has fired shot after shot against the EU’s digital rule book — claiming that the Digital Services Act and the Digital Markets Act, respectively, censor American citizens and unfairly target U.S. companies.   The European Commission was quick to stress its regulatory autonomy.  “It is the sovereign right of the EU and its member states to regulate economic activities on our territory, which are consistent with our democratic values,” the EU’s chief spokesperson Paula Pinho told reporters Tuesday.   Trump’s new threat, however, challenges the EU’s logic that a joint statement published with the U.S. last week provides industry with crucial predictability.  “This is a further indication that the so-called deal of July 27 does not bring security and stability,” said Bernd Lange, a lawmaker with the Socialists and Democrats who chairs the trade committee in the European Parliament.   As Trump and Commission President Ursula von der Leyen shook hands on the deal in Scotland at the end of July, many saw it as an act of surrender by the EU. Chiefly, the EU agreed to scrap tariffs on all U.S. industrial goods in exchange for a 15 percent baseline tariff, which would also apply to cars that now face a 27.5 percent levy.  This, Brussels argued at the time, was a price worth paying to shield the EU — and its regulatory autonomy — from future escalation from the mercurial Trump administration.  “I can only repeat, and stress how much we’ve worked to ensure that we are not touching in any way our legitimate digital regulation. That includes, of course, the Digital Markets Act, as well as the Digital Services Act, as well the digital services taxes of our member states,” a senior EU official told reporters last week after the EU executive unveiled its joint statement with the U.S.   Less than a week on, the EU is finding out the hard way that Trump’s commitments can quickly be overtaken by his ever-shifting priorities.   “Deals with the Trump administration simply do not create the kind of lasting certainty everyone is desperate for, because certainty, predictability and strict fidelity to treaties are not White House objectives,” said Dmitry Grozoubinski, a former trade diplomat and author of the book “Why Politicians Lie About Trade.” “Given the public interest in digital regulation, the suspicion of U.S. tech giants, and how quickly this extortion is coming after what was supposed to be a glorious trade peace across the Atlantic — this may be a bridge too far for Europe,” he added.   The Commission pushed back against that interpretation.   “We believe that this deal indeed has provided for predictability and stability,” Pinho told a news briefing.  RETALIATION MOJO   In the final stages of its negotiations with the Trump administration, Europe’s appetite to retaliate against Washington faded, with capitals desperate to keep Trump focused on ending the war in Ukraine.   “We prepared [countermeasures],” Sabine Weyand, the EU’s top trade official, told a panel at the European Forum Alpbach on Monday before Trump’s latest announcement. “But, of course, this requires you to be ready to accept the cost that is associated with countermeasures and to accept that is linked to further escalation. There was clearly no appetite for that. And, as I said, the overwhelming point was Ukraine and the U.S. security guarantees.”  Trump’s latest move could, however, put pressure once again on the EU executive and member countries to respond. One option would be to take countermeasures — which would impose tariffs on €93 billion in U.S. goods ranging from aircraft to autos, and from soybeans to Kentucky bourbon — out of the freezer.   Another — which some are already calling for — would be to deploy its Anti-Coercion Instrument. This “trade bazooka” foresees potentially broad action in response to trade blackmail. “In my opinion, this is clearly a case for the AC instrument,” said Lange.  Pinho, asked directly about the Anti-Coercion Instrument, declined to speculate.  UP NEXT   The EU’s weakness in negotiating with Trump contrasts with Beijing’s more aggressive strategy. Capitalizing on its near-monopoly on rare earths, China in April imposed export restrictions on the critical minerals — Trump earlier this month extended a tariff truce with China for another 90 days, setting the stage for broader negotiations between the world’s two biggest economies.  Its strategic weaknesses in sectors ranging from military to technology condemns the EU, however, to reactionary limbo in its dealings with the U.S.   On Wednesday, the Commission is expected to put forward its proposals to lift tariffs on U.S. industrial goods and cars.   According to the joint statement, the U.S. will lower its 27.5 percent tariffs on cars and automotive parts to the baseline 15 percent only after the EU proposes legislation to eliminate tariffs on all U.S. industrial goods. If the Commission goes ahead with the proposal, the tariff relief would apply retroactively from Aug. 1.  “We will proceed with the implementation of the framework agreement,” said Pinho. Sarah Wheaton contributed reporting.

BRUSSELS — Tropical forest loss rocketed to a 20-year high in 2024 as climate change-fueled wildfires tore through some of the planet’s most important natural carbon sinks. Close to 7 million hectares of primary tropical forests were destroyed last year, with nearly half of that due to fire, said a report from the World Resources Institute (WRI) and the University of Maryland published Wednesday. Wildfires also swept through boreal forests — in particular in Russia and Canada — leading to 30 million hectares of trees being lost globally in 2024, and resulting in an estimated 4.1 gigatons of greenhouse gas emissions. It came as the European Union decided to delay anti-deforestation rules and wind back other environmental protections in a bid to boost economic competitiveness. “This is a dangerous feedback loop we cannot afford to trigger further,” warned Peter Potapov, research professor at the University of Maryland. “If this trend [of fire-driven forest loss] continues, it could permanently transform critical natural areas and unleash large amounts of carbon — intensifying climate change and fueling even more extreme fires.” Climate change and El Niño (a cyclical weather phenomenon that exacerbates global warming’s impact) created hotter and drier conditions last year, helping make 2024 the hottest year on record. That elevated the risks of larger and more widespread fires, the researchers noted. Latin America “was particularly hard hit, reversing the progress we saw in Brazil and Colombia in 2023.” The Congo basin saw notably high primary forest loss, while deforestation decreased in Indonesia and Malaysia last year. Even with the sharp rise in wildfire damage, agriculture was still the main driver of global deforestation over the last 24 years, according to the report. The overall picture is hurting forests’ capacity to absorb and store carbon, which helps mitigate climate change. It also means that the world is off track to reach its objective of halting and reversing global deforestation by 2030 — a goal more than 140 countries pledged at the Glasgow COP26 climate summit in 2021. “This should be a wake-up call,” said Elizabeth Goldman, co-director of the WRI’s Global Forest Watch, noting that to reach this 2030 goal, global deforestation would need to decrease by 20 percent every year until the end of the decade. EU REGULATION LOOMING The data comes as companies are getting ready to implement new EU rules requiring them to police their supply chains and ensure they’re deforestation-free. Under the EU Deforestation Regulation, companies selling coffee, cocoa, palm oil, soy, rubber, beef and timber on the EU market will have to prove they sourced the commodities from areas that haven’t been cleared to make space for agriculture. The new rules kick in on Dec. 30. But a group of centrist and right-wing European Parliament members is pushing to delay the rules further and tweak them to reduce red tape for European farmers and land managers. The legislation risks “placing disproportionate burdens” on small companies “without delivering the intended results” and “imposes technically unrealistic demands for tracing and verifying the origin of commodities,” complained Veronika Vrecionová, a Czech MEP of the right-wing European Conservatives and Reformists and the chair of Parliament’s agriculture committee, in a letter obtained by POLITICO. The missive, sent May 14 to European Commission President Ursula von der Leyen and EU Environment Commissioner Jessika Roswall, also calls for delaying the new rules once again. EU policymakers agreed late last year to postpone the legislation’s implementation by a year, from Dec. 2024 to Dec. 2025. “We fully support the aim of combating deforestation, but we believe that a framework with such systemic shortcomings may ultimately fail to identify actual illegal activity,” Vrecionová wrote, warning that “it could hinder legitimate EU-based producers and compromise the competitiveness of our agri-food and forestry sectors.” The letter also shows that right-wing forces are not giving up on their attempt to modify the regulation. Late last year, the center-right European People’s Party — the largest group in Parliament and von der Leyen’s political family — failed in its push to amend the legislation and label the EU a “no risk” area, shielding small European farmers and foresters from the rules. Vrecionová’s letter reiterated that demand.

President Donald Trump has spent the first three months of his second term imposing his will on the rest of the globe, telling long-time allies that they “don’t have the cards.” But in capitals across Europe and elsewhere, debates are raging over the hands they could play. Proposals under consideration range from minor irritants to extreme actions that could sever defense and economic relationships that have cemented alliances for nearly a century. Those include finding alternative suppliers of military equipment and munitions from U.S.-based defense contractors, enacting stronger counter-tariffs, rolling back intellectual property protections for U.S. companies and lessening their reliance on American tech giants, according to conversations with more than two dozen government officials in Europe and Canada, many of whom were granted anonymity to describe high-level discussions they’re not authorized to speak about publicly. “There’s a change in mindset. We’ve moved on from seduction to strategy,” one EU diplomat said about dealing with Trump. “We’ll take decisions to protect ourselves.” The diplomat added: “We need to strike a path that works without Washington.” Less than three months into Trump’s term, his pursuit of a transactional, mercantilist and imperialist foreign policy has rattled leaders across the globe. It started with the president’s persistence in talking about annexing Canada and Greenland, his eagerness to end the war in Ukraine largely on Russia’s terms and Vice President JD Vance’s caustic comments describing Europe as freeloaders. But Trump’s market-cratering move this month to impose massive tariffs on nearly all U.S. trading partners — based on a formula scores of economists found bizarre — caused many longtime allies to shed any last remnants of magical thinking that they could manage or contain this predictably unpredictable American president as they did during his first term. Leaders from London to Warsaw, Helsinki to Rome, are continuing efforts to de-escalate and maintain productive relationships with Washington — while considering how to “de-risk” by protecting themselves from Trump’s havoc. Their initial moves could be the first cracks in a dam that could break wide open, unleashing a torrent of increasingly punitive actions that, ultimately, could unravel a transatlantic alliance that has tied America to Europe for eight decades and refashion the global order. The White House, however, downplayed the potential for a rift, asserting that Trump’s efforts to end the war in Ukraine — which he has undertaken with little input from NATO allies — are aimed at making Europe more secure, even though many of the continent’s leaders fear that any potential concessions to Russian President Vladimir Putin will make their collective security even more precarious. “The President has led in an effort to bring the biggest conflict since WWII in Europe to a peaceful resolution, and he is helping restore international shipping lanes in the Red Sea that will also benefit European markets,” said national security council spokesperson Brian Hughes. “We will continue to work with our European allies on ways to improve security cooperation — be that through foreign military sales, encouraging our allies to increase their defense budgets, and holding our adversaries like the Houthis accountable.” Of course, private Signal messages during the attack on the Houthis laid bare how some of the president’s most senior aides view Europe as “free-loading,” with Vance lamenting that he “hated” bailing the continent out. Trump officials “seem to think Europe is this dying continent that has no future and is not capable of independent action, that Russia is the more formidable power,” said Minna Ålander, a fellow on transatlantic defense and security at the Center for European Policy Analysis. “They may soon find out that the opposite is true.” SHIFTING DEFENSE DOLLARS AWAY FROM AMERICA Few countries across Europe are more indebted or unconditionally loyal to the U.S. than Poland. And yet, posters are now showing up around Warsaw merging two silhouettes: Putin and Trump. It’s an indication of the extent to which two months of direct threats and challenges from Washington are rapidly changing public opinion — and the private calculations of government officials — in Warsaw and in other European capitals. Trump has been pushing NATO members to increase their spending on defense, saying that the alliance’s requirement that nations allocate 2 percent of GDP should be raised to 5 percent. But the result of his pressure may well be that NATO allies shift their defense investments away from American contracts, shrinking a lucrative financial arrangement upon which the U.S. relies. Poland, which borders Ukraine and Russia-aligned Belarus, is already spending 4.7 percent of its GDP on defense, the most of any NATO member. And it buys more American defense equipment than any other country in the world. Trump and Defense Secretary Pete Hegseth have praised Poland as an exemplary ally. But Warsaw is reconsidering that partnership. Prime Minister Donald Tusk has ruled out the cancellation of any existing contracts, but there are qualms in Warsaw about entering new ones. “Confidence in the USA has been severely shaken,” said Pawel Kowal, the Ukraine envoy in Tusk’s office. “I don’t think we will be placing any more major orders with the American arms industry for the time being after analyzing our experiences with what is happening now.” That’s no small statement given how much Poland’s procurement of American defense equipment, Kowal added, has helped to solidify relations with Washington, and the Trump administration in particular. Poland plans to spend $47.1 billion on defense in 2025, more than half of which will go to U.S. contractors. But Kowal says Poland now needs “to diversify our arms purchases” and “to buy in Europe or rely more on our own Polish arms industry.” Cezary Tomczyk, Poland’s deputy defense minister, said that maintaining strong ties to the U.S. remains important, noting that Trump has encouraged Europe to be more self-reliant and saying investing more in production in Poland is part of that. But Tomczyk offered a word of caution, noting that the U.S. has tangible interests in Poland as well. “If the U.S. alienates Poland, it would not be good for the U.S.,” he said. As Trump prepared to take office for the second time, European leaders strategized that they could keep him engaged with NATO by meeting his demand that they increase defense spending with commitments to direct most of their outlays to American companies. Now, they’re moving in the opposite direction. “Europe is now going to heavily increase its investments to defense. And it will be very logical that Europe is turning this money to its own economy,” said Estonian Foreign Minister Margus Tsahkna, who also referred to the sudden questions about the reliability of American-made weapons systems that arose after Trump abruptly halted defense aid to and intelligence sharing with Ukraine in March. “There must be a political trust that if you buy something, you must be sure that you can use them as well.” Many of the countries determined to boost defense spending are loath to invest in America’s defense industrial base — and newly aware that placating Trump isn’t as simple as it was during his first term. “In previous years, under Trump 1.0 and even afterward, we said, yes, we can appease him. He wants to make deals, he wants us to go on a big shopping spree from him: Buy F-35s, Patriots, liquified natural gas and all sorts of other things … and then he’ll be appeased,” said Peter Beyer, a member of Germany’s Bundestag from the conservative Christian Democrats, the party expected to lead Germany’s incoming government. “I think that’s a much too simplistic calculation. It all doesn’t add up, at least not today. It won’t work.” Trump’s willingness to use U.S.-controlled weapons systems as leverage over Ukraine in the midst of a war has given rise to new worries. Canada, Portugal, Denmark and Germany have publicly expressed reservations about continuing to purchase F-35 fighter jets from the U.S. given that Trump, in the event of a political disagreement, could block access to spare parts and software upgrades needed to keep the aircraft flying and combat-ready. German Defense Minister Boris Pistorius has asserted that Berlin will continue to honor its F-35 contracts, calling the U.S. “an important ally for us.” But he has also made clear that’s at least partly due to a lack of other options when it comes to upgrading a current fleet that is about to age out. Beyer, a former transatlantic coordinator for the German government, said that even if concerns about an F-35 “kill switch” aren’t reality-based, it would be “daft” for Berlin to continue relying so heavily on America’s security backing given the administration’s approach. “If we purchase weapons systems, be it Patriot, F-35 or whatever, Lockheed Martin, Northrop Grumman, Raytheon, we have to be aware that it’s like a Damocles sword that a shutdown could occur,” Beyer said. “This thought is now there in people’s minds, also in connection with Starlink, Elon Musk and the data for Ukraine — this discussion is in full swing.” Given that Europe is so integrated into America’s defense industrial base after decades of procurement, finding European alternatives to U.S. systems won’t happen overnight. But even the U.S.-made Patriot system has its challengers. The French-Italian SAMP/T, which takes only two years to produce, is now going through upgrades to put its range on par with Patriots. And confidence about it being a viable alternative has grown after its widespread usage by Ukraine over the last few years. TAKING COUNTER-TARIFFS TO THE EXTREME On April 2, Trump levied 20 percent tariffs on the EU as part of a sweeping policy shift aimed at erasing trade deficits, only to abruptly hit the pause button less than a week later to halt a global economic panic that was starting to affect even America’s bond market. Even if the detente holds, allies still reeling from the whiplash still face a new reality of chronic uncertainty. Hours before Trump announced he was pausing all tariffs except those on China, the EU voted to hit back with counter-tariffs on nearly €21 billion of U.S. products — soybeans, motorcycles and orange juice — but stopped short of retaliating on the 20 percent “reciprocal” tariff Trump had imposed on all EU exports to the U.S. “Right now, Europe is focusing on customs duties in response to the duties announced by the U.S., and we aren’t looking for escalation. We don’t want to fuel confrontation, but we do want to be very clear,” one senior European diplomat said. The EU quickly put its retaliatory measures on hold after Trump announced his 90-day pause. But if the tit-for-tat on trade ratchets back up, Europe could go even further. There has been some talk already about deploying the EU’s Anti-Coercion Instrument, adopted in 2023 in response to China’s attempted political blackmailing of Lithuania over its position on Taiwan. The ACI, dubbed by some EU officials the “bazooka,” sets out a step-by-step procedure if and when coercion is identified, starting with talks with the country involved to determine the best way to resolve the matter. If the economic coercion continues, the EU is then empowered to ratchet up its response with countermeasures ranging from tariffs increases and exclusion from public procurement to restrictions on intellectual property rights protection. Although Trump’s initial rationale for the tariffs — boosting American manufacturing — is not ostensibly coercive, the EU Commission is considering and discussing with member states whether the ACI could be a weapon in a prolonged trade war with the U.S., according to one EU official. “It has been discussed at the European Commission level, but it’s really the nuclear option,” the European official said. “It was devised against a systemic rival [China]. You start hitting data, services, it’s a lot more imposing, you really are widening the scope. The decision is not taken, but it’s been more than just mentioned at the Commission, it’s being discussed as a possibility.” There is hope that such a move won’t be necessary. “The brake [on Trump] could well come from the markets,” another senior European diplomat said. “Europe is not defenseless.” TARGETING SPECIFIC PRODUCTS Some countries — and their citizens — are also looking at how to hit back at individual companies or industries to cause pain or grab headlines in the United States. Some EU governments are considering weaponizing agricultural and environmental standards to discriminate against American products. They could ban specific products from certain Trump-supporting states, like Kentucky bourbon or Florida orange juice. As boycotts of Tesla have already shown — European sales were down 45 percent in January — public sentiment alone could drive people to stop buying American products on their own. Across the continent, Facebook groups devoted to organizing boycotts of American products have amassed tens of thousands of followers. In Denmark, a survey showed that roughly half the population has avoided buying American products since Trump’s inauguration. And the country’s largest grocery store operator now marks whether products sold are from European companies on its electronic price tags. There’s also tourism. Canada is among a handful of countries that have issued advisories warning about traveling to the U.S., going as far as to ask citizens to “reconsider” visiting the States. Passenger bookings on airline routes between the U.S. and Canada are down 70 percent compared to the same period a year ago, a shift that industry analysts believe will cost $2 billion in lost travel and business revenue. Similarly, travel from Europe to the U.S. has dropped by 35 percent in the last two months. If Trump imposes tariffs he is weighing on pharmaceuticals coming into the country, the EU might decide to add export controls on top of that — making Americans pay even more for popular drugs like Ozempic, Novo Nordisk’s obesity and diabetes drug, which is largely produced in Denmark. DISRUPTING SUPPLY CHAINS Some countries are also looking at ways to limit — or make more costly — essential products or services the U.S. depends on. The EU could impose export tariffs on EU-produced machinery, electrical equipment or pharmaceuticals — creating immediate price pressure on U.S. supply chains. That would come at a high cost for European countries, but some officials and analysts aren’t ruling it out. “Europe can have some chokepoints vis à vis America. Europe trades in machinery and optical equipment, we can effect a standstill of American production,” Swedish economist Fredrik Erixon said. “These products are not easily substitutable.” For instance, Europe could impose export controls on products made by Dutch company ASML, the world’s biggest provider of photolithography machines which are used to produce computer chips. This would force U.S. manufacturers that use ASML technology — American consumers — to pay more. Other choke points could be highly advanced technology products made by Nokia and Ericsson that are essential to network operators. Erixon described such moves as “the nuclear option” in a transatlantic trade war, given how intertwined their supply chains are. But, he said, “America is in a predicament because it wants to impose general tariffs, whereas the EU has the possibility of rearranging trade flows.” Some European companies have taken to disrupting supply lines on their own. A Norwegian fuel supplier refused to refuel the U.S. Navy warships and submarines after Trump and Vance berated Ukraine’s president in the Oval Office. It was an isolated incident, but illuminated how much American interests rely on and benefit from strong alliances — and what stands to be lost if relationships deteriorate. And allies closer to home have other levers to pull. Canada supplied 27,220,531 megawatt hours of electricity to the U.S. last year, not to mention 59 percent of the crude oil America imports — a point of leverage, some leaders have noted, in the event of a protracted trade war. The premier of Canada’s largest province threatened last month to shut off the electricity that powers much of New England the Great Lakes states, vowing that Americans “need to feel the pain” from Trump’s trade war. At the same time, the premier of Nova Scotia said American companies would no longer be able to bid on provincial procurement contracts and could see their existing contracts canceled, remarking that “some people need to touch the hot stove to learn.” STICKING IT TO SILICON VALLEY Musk’s involvement with the Department of Government Efficiency and the presence of a raft of tech CEOs at Trump’s inauguration have highlighted the extent to which U.S. tech leaders are increasingly in league with Trump. The EU had already been in the lead on regulating tech companies and attempting to curb the spread of misinformation on privately owned platforms like Musk’s X. But there had been a sense of wanting to work together with the U.S. on policies and standards. That’s changing. In the Netherlands, lawmakers last month approved funding for a new Dutch-controlled cloud services platform to reduce the country’s reliance on U.S. tech companies. That followed a call from then-Belgian Prime Minister Alexander De Croo for the EU to “take action” in response to Musk’s involvement in recent European elections where he advocated for far-right candidates. The EU has been investigating X, the social media platform Musk owns, for nearly a year and a half over suspected breaches of Europe’s Digital Services Act, which requires platforms with over 45 million monthly users to comply with a raft of stringent rules designed to keep users safe and curb the spread of illegal, harmful content. Cutting against the grain, Britain is considering a cut to the digital services tax levied on tech giants, although the optics of doing so would be extremely uncomfortable at a time when the government is also drawing up plans to reduce welfare payments for disabled people. In a sign of how countries can leverage their own tech markets and companies that are important to the U.S., China is harnessing its control over TikTok’s future in the U.S. Trump has been forced to delay the enforcement of a law requiring that TikTok find a new owner in the U.S. or be banned over security concerns. That’s because Beijing, upset about being hit with additional tariffs, scuttled a tentative deal giving a group of American investors a 50 percent stake in the company. GOING IT ALONE Whether allies in Europe or the Americas end up implementing some of the more aggressive responses they’re now discussing, Trump’s unilateral approach and disregard for the interwoven economic and security interests at the core of longstanding alliances has heightened the urgency of lessening their dependence on Washington. No one put it in more stark terms than Canada’s new prime minister, Mark Carney, responding to Trump’s tariffs: “The old relationship we had with the United States, based on deepening integration of our economies and tight security and military cooperation, is over,” he said in late March. Increasingly, Europe’s sudden seriousness about defense spending isn’t driven by the idea that placating Trump will help maintain American hard power as a backstop for the continent’s defense — but by the realization that in many ways Europe is already on its own. That’s a message Hegseth and Vance have conveyed directly both in private meetings and public statements. Following his election two months ago, Germany’s new chancellor, Friedrich Merz, declared his top priority to be strengthening Europe to “achieve independence from the USA,” lamenting that Trump has made clear that “the Americans … are largely indifferent to the fate of Europe.” To that end, Merz succeeded in winning the Bundeswehr’s approval to skirt Germany’s “debt brake” and dramatically boost defense spending, a striking about-face for a country that has been wary of greater militarization since the end of World War II. And as more countries follow suit, there is growing interest in forming new coalitions. Several countries in Europe’s north and east appear interested in joining the six-member Organisation for Joint Armament Cooperation, or OCCAR, which manages armament programs on behalf of France, Germany, Italy, Spain, the United Kingdom and Belgium. Denmark, which has long contributed more to NATO defenses than many larger member countries, has joined the European Sky Shield Initiative to create a multi-layered air defense system in Europe. “In three to five years, we need to be totally able to defend ourselves in Europe,” Danish Prime Minister Mette Frederiksen told POLITICO last month. Similarly on the trade front, allies are eager to insulate themselves from Trump’s erratic approach by replacing trade with the U.S. with new partners. French Trade Minister Laurent Saint-Martin said last month that Paris was suddenly rethinking its opposition to a massive EU trade pact with several South American nations, calling on leaders in Brussels to address French concerns so that the “Mercosur” deal could be finalized. Trump’s “Liberation Day” announcement, Saint-Martin said, was “a wake-up call.” After Trump’s reversal on tariffs left China as his primary target under an increased 145 percent tariff, Beijing opened negotiations with the EU to abolish the bloc’s tariffs on imported vehicles from China. Those discussions, if successful, could dramatically reduce the volume of American-made vehicles sold in the European market. In the long run, Trump’s belief that he has better cards could weaken America’s hand, reducing its leverage over longtime allies once they’re more independent from Washington. “We need to take advantage of the crisis with the U.S., to rebuild our economic, defense and energy sovereignty,” said a former French minister. “And we need to carry on hitting back.” This text is a collaboration of the Axel Springer Global Reporters Network. Eli Stokols reported from Washington, WELT’s Philipp Fritz reported from Warsaw, Clea Caulcutt reported from Paris and Emily Schultheis reported from Los Angeles. Nicholas Vinocur in Brussels and Esther Webber in London contributed to this report.

BRUSSELS — The European Union doesn’t really do knee-jerk reactions. And when it comes to trade wars, it prepares its case, builds a consensus among its members — and saves its most painful retaliation until last. Donald Trump’s unprecedented tariff onslaught is no exception.  Just after the bloc locked in its response on Wednesday to Trump’s month-old steel and aluminum tariffs, the U.S. president announced a 90-day truce on the “reciprocal” tariffs he imposed on “Liberation Day” a week earlier. Trump had hit the 27-nation bloc with a 20 percent duty on all goods. Under pressure as financial markets melted down, he halved the levy to 10 percent — the baseline he has set in his bid to bring investment and industrial jobs lost to globalization back home.  So it happened that, on Thursday, European Commission President Ursula von der Leyen suspended EU tariffs on €20.9 billion in U.S. exports before they even took effect. It was the retaliation that never happened. At least not yet. “We want to give negotiations a chance,” von der Leyen said in a social media post. That was followed by a kicker: “If negotiations are not satisfactory, our countermeasures will kick in. Preparatory work on further countermeasures continues. As I have said before, all options remain on the table.” By design as much as by strategy, the bloc’s reaction to Trump is moving slowly, anchored in legal justification and carefully weighted through internal consensus — with businesses, but most importantly, with the bloc’s member countries. That’s because while trade policy may be the Commission’s turf, Brussels still needs political cover.  Under the EU’s arcane rules, trade escalations usually require the support of a “qualified majority” of national capitals — at least 15 of the EU’s 27 member countries. And even in cases where the Commission can legally steamroll national governments, it tends to build coalitions, knowing that the power it wields has been delegated to it by EU governments.  Put another way, if you have to speak to 27 friends before going public, it tends to forestall any emotional outbursts. (Von der Leyen’s announcement followed a meeting of EU envoys in a “secure room” to discuss Trump’s tariff retreat. Unlike the U.S. president, she doesn’t get to rule by executive order or by social media fiat.) “The imperative of devising negotiation strategies that are anchored in the support of member states forces the Commission to play the long game,” said David Kleimann, a senior trade expert at the ODI think tank.  “The stark preference for well-prepared negotiations is currently working out in the EU’s favor as stock and bond markets have caused more damage to Trump’s tariff plans than any immediate retaliatory response could possibly afford,” he added. For all the relief over Trump’s 90-day truce, his 25 percent tariffs on steel and aluminum, as well as on cars, remain in force.  The EU insists it can escalate if it has to — and has even designed a scary trade “bazooka,” known as the Anti-Coercion Instrument, to hit back at the kind of economic bullying Trump is practicing. But deploying it would still take at least six months, and two more qualified majorities. As Ireland’s foreign and trade minister Simon Harris put it at a meeting of EU trade ministers in Luxembourg that paved the way for Wednesday’s countermeasures vote, activating the ACI would represent an extraordinary escalation. “It is in many ways the nuclear option,” he told reporters. SIGH OF RELIEF So when Trump on Wednesday called for a three-month break in the tit-for-tat trade escalation, his hand forced by the imminent risk of a global financial crisis, Brussels sighed with relief. ‘Wait and see’ does pay off, the bloc reflected. At least for now.  “Stock markets are doing the work for us,” one EU diplomat said earlier this week, as U.S. equity indexes flirted with bear-market territory and a run on Treasury bonds raised fears that the stability of the global financial system was in jeopardy.  The bloc rejoiced at Trump’s tariff suspension and responded within 24 hours with its own 90-day pause on its countermeasures against the steel and aluminum tariffs Trump imposed on March 12, opening a transatlantic front in his global trade war. The pause, in the EU’s thinking, gives some needed breathing space to everyone, including Trump and the markets, to calm down and come to their senses.  As a second EU diplomat put it: “Let’s talk, and seriously this time, otherwise we still retaliate.”  BOURBON OUT, SOYBEANS IN The purpose of the EU’s strategy is to hurt Trump’s Republican cohorts and their MAGA voter base as much as possible — without injuring European interests.  With those aims, patience is a virtue and restraint is power, officials in Brussels stress.  When it crafted its list of tariffs to respond to the U.S. steel and aluminum duties, the Commission designed the response to come in three separate waves of duties from April 15 to Dec. 1, depending on the product.  A 25 percent tariff on soybeans, the most valuable item on the bloc’s hit list, was to arrive last, giving European farmers, who use the product for animal feed, time to adapt and source their supply in Brazil or Argentina, for instance.  Over 80 percent of American soybean exports to the EU come from Louisiana, the home state of Republican House Speaker Mike Johnson — something senior EU officials have been eager to emphasize.  As for minimizing the pain: Lobbying by the French, Italian and Irish governments secured the removal of Kentucky bourbon from a retaliatory list dating back to Trump’s first term. The Commission would rather everyone be on board than expose national leaders to Trump’s threat to hit European booze exports with 200 percent tariffs. RAISON D’ÊTRE While Trump wants to take a wrecking ball to the multilateral trading system that Washington nurtured after World War II, the European Union isn’t ready to give it up so easily. After all, the single market is arguably the bloc’s greatest achievement, and rules-based trade is part of its DNA. That means playing by the established rules, with the World Trade Organization acting as an umpire, even if Washington has paralyzed its operation by blocking judicial appointments to the WTO’s highest appeals court. “Any offer we make to the U.S. needs to be consistent with WTO rules. At this moment in time, we cannot afford to appear that we also have decided to ignore the rules,” said Ignacio García Bercero, who was the U.S. point person at the Commission’s trade department during Trump’s first term.  So far, EU capitals welcome the Commission’s approach. Even if bourbon, thanks to French  exceptionnalisme, got special treatment, capitals still feel that the pain has been shared equally. This week’s trade countermeasures were backed by 26 member countries with only Hungary, a perennial outsider, dissenting. “Member states are almost relieved they don’t have to deal with this themselves,” a third EU diplomat said.  “But the speed at which we should react is slightly more controversial.”  Koen Verhelst and Jakob Weizman contributed reporting. 

BRUSSELS ― Crashing markets, tariffs on penguins, recession forecasts and the backflip to end all backflips.  After a breathlessly chaotic week, U.S. President Donald Trump called a temporary truce in his global trade war. We hope you kept up. While much of the world (apart from tariff-battered China, of course) breathed a sigh of relief after Trump hit pause on his most severe economy-shaking levies, it is watching keenly to see if the president remains true to his word. So if you didn’t keep up, here’s how Trump’s tariff U-turn played out, what it meant, why it happened ― and what, crucially, will happen next. (PS: That’s anyone’s guess, quite frankly.) SO WHAT WAS THAT ALL ABOUT? In an abrupt about-face Wednesday, Trump announced a temporary cease-fire in his trade war, with so-called reciprocal tariffs on all countries except China paused for 90 days. The U-turn came after widespread market chaos and diplomatic protests from Berlin to Beijing over his plans to impose punishing worldwide tariffs, ranging from 10 percent to as high as 50 percent.  Though he did not explicitly admit that the financial fallout had prompted him to reverse course, Trump acknowledged Wednesday that the markets had looked “pretty glum” and that people were “getting a little bit yippy.” While he has backed off on most of his planned tariffs for the time being, Trump said in a post on Truth Social that he would retain 10 percent baseline tariffs on countries across the board — which is still higher than almost any tariff regime ever. BANG GO THE MARKETS The money people didn’t take Trump’s initial tariff imposition well, to put it mildly. As the week went on, the S&P 500 index, which tracks the performance of 500 of the largest U.S. publicly traded companies, fell nearly 13 percent. That wiped trillions of dollars off the market value and sent the stock price of iconic brands like Apple and Meta (more on them later in a different context, funnily enough) plummeting. The S&P 500 index, which tracks the performance of 500 of the largest U.S. publicly traded companies, fell nearly 13 percent. | Angela Weiss/AFP via Getty Images Investment bank CEOs began to sound the alarm about an incoming recession, and panic spread at exchanges from London to Paris to Tokyo, which all plunged deep into the red. In the end, though, it was not stocks but U.S. government bonds — the tradeable “I owe you” notes that America uses to finance itself — that changed Trump’s mind.  “I was watching the bond market,” Trump said. “The bond market is very tricky. I was watching it. But if you look at it now, it’s beautiful.” Usually, when stocks go down, the price of government bonds rises. That’s because they’re considered a safe investment in times of market turmoil. But sometimes, when things are really bad (we’ll put it in caps, like a Trump social media post: REALLY BAD), both stocks and bonds sell off at the same time. It happened at the height of Covid, and it happened again in this situation. A meltdown in the $29 trillion U.S. government debt market would have risked a catastrophic financial crisis. It was bonds, after all, that defeated short-lived U.K. Prime Minister Liz Truss, and it was bonds that made Trump sound the retreat.  THE EU STRIKES BACK ― OR DOES IT? After Trump’s “Liberation Day,” European Commission President Ursula von der Leyen reminded Trump that Brussels was “already finalizing a first package of countermeasures in response to tariffs on steel.” On April 7, Commission trade chief Maroš Šefčovič met EU ministers in Luxembourg to discuss the draft list of countermeasures. He emphasized that the bloc’s response was “very gradual, just reacting to steel and aluminum.” With the benefit of hindsight, that looks like a good call. “What’s important here is that Europe reacts in a calm and measured way,” Irish Foreign Minister Simon Harris said at the meeting. “Time is somewhat on our side. We’ve got to actually take this step by step. And that’s what we’re going to do.” Two days later, EU member countries voted almost unanimously to approve retaliatory tariffs on what amounted to almost €21 billion of U.S. exports to Europe, including politically sensitive products like Louisiana-made soybeans.  IS IT ALL ABOUT CHINA? In the same Truth Social post where he announced he was tapping the brakes on global tariffs, Trump also said he would raise already crushingly high penalties on China to 125 percent, accusing them of “ripping off the U.S.A.” By offering a reprieve to the rest of the world while putting the screws to Beijing, Trump appears to have been setting the stage for a more targeted trade war, one that pits the world’s two largest economies against each other. Trump has accused China of “ripping off the U.S.A.” | Patrik Stollarz/AFP via Getty Images Part of Trump’s rationale for easing up on his threatened tariffs was that most countries did not hit back. An exception was China, which had earlier retaliated with tariffs of 84 percent on American goods, a response Trump called disrespectful.  But hours before he backtracked, the EU, which was slugged with a 20 percent tariff on its products, also returned fire by approving retaliatory tariffs ― but only on steel and aluminum. When an Oval Office pool reporter pressed Trump about the EU’s tariffs on Wednesday, he appeared surprised to learn about the payback, ominously calling it “bad timing.” Commerce Secretary Howard Lutnick jumped in quickly to add that the EU had not yet pulled the trigger on its tariffs, which seemed to mollify Trump. So there’s still some confusion over whether the president will ultimately decide to go easier on Brussels. Von der Leyen and the Commission confirmed on Thursday that the EU’s countermeasures will also be put on hold for 90 days — giving both sides of the Atlantic ample time to negotiate. AND THEN THERE’S ENERGY On Tuesday, Trump called on the EU to spend an additional $350 billion on American fossil fuels to address the imbalance in transatlantic trade — equivalent to more than the entire annual U.S. oil output at current rates. European diplomats and officials have made repeated trips to Washington in recent months, looking to take the White House up on the offer by agreeing to buy more gas to avert a trade war. Officials involved in the talks told POLITICO that they had been left frustrated by the administration’s apparent disinterest in actually agreeing a deal. In an interview last week, Czech Foreign Minister Jan Lipavský said Trump’s team had “political” reasons to want to impose tariffs, and that “negotiation[s] before ‘Liberation Day’ [were] not able to change it.” Now, given a 90-day reprieve from Trump’s formidable trade barriers, the bloc is doubling down on efforts to secure an agreement to buy more gas. IT HAS AN IMPACT ON THE EU’S OTHER WORK The trade conflict has cut across other critical policy areas.  The European Commission is delaying decisions to fine American tech giants under its digital antitrust rules, which has prompted speculation that the EU executive is holding fire in a bid to navigate trade tensions. The EU is delaying decisons to fine tech giants such as Apple. | Justin Sullivan/Getty Images Penalties against Apple and Meta, which owns Facebook and Whatsapp, would have been certain to trigger a major backlash from the U.S. administration and its allies in Congress. Brussels had been expected to issue decisions in three year-long investigations into breaches of the bloc’s signature Digital Markets Act as soon as the end of March, a deadline that EU competition chief Teresa Ribera said she was committed to early this year.  That has now passed and fines haven’t yet been imposed. A MERCI FROM PARIS Would a thank-you note to Donald Trump show weakness, Europe wonders?   If not, French President Emmanuel Macron should consider sending one to his “good friend” at 1600 Pennsylvania Avenue. France can ill afford a trade war as it confronts a maelstrom of crises that have exposed fundamental cracks in the 66-year-old Fifth Republic ― the name for the country’s current system of government. But the chaos at home doesn’t mean that Macron, who has never been afraid to take a high-stakes gamble, isn’t ready to fight fire with fire. As one of the loudest voices in Europe pushing for a united and more muscular response to trade threats, meekly returning to Washington wouldn’t have been the French president’s M.O.  In the hours that followed “Liberation Day,” Macron gathered stakeholders at the Elysée Palace to discuss the situation and then publicly called on all companies within the EU to stop investing in the U.S. “until we have clarified things.”  Even with some of the tariffs now delayed, Macron is likely to continue preaching the gospel of unity in Brussels as his government works to shape a deal more to France’s liking (take a look at what happened with American bourbon). For now, though, it’s crisis averted. So, Emmanuel, looks like it might be time to send a bottle of your finest grand cru to the White House (even if its current occupant is a teetotaler) and get a handle on the immediate challenges facing your country. But don’t forget to set a 90-day reminder on your phone, because that trade war still looms on the horizon.  THE BRITS WANT TO ‘COOLLY NEGOTIATE’ In London, Prime Minister Keir Starmer — who has studiously avoided criticizing Trump since the U.S. president took office — started the week by warning that the era of globalization had come to an end, vowing to shield British industry from the impact of tariffs and talking up prospective trade agreements with countries such as India and Australia. Starmer’s center-left government — spared the worst of the reciprocal tariffs but hit by hikes in auto and steel levies, as well as the universal 10 percent rate — has been frantically trying to land an economic agreement with Washington. The PM hinted Tuesday that he was even willing to shear off the rough edges of British tech legislation to get there. Keir Starmer is playing it cool, avoiding any criticism of Trump. | WPA pool photo by Kirsty Wigglesworth/Getty Images While Trump’s U-turn has been welcomed in London, a spokesperson for Starmer’s office said Wednesday night that a trade war remains in “nobody’s interest,” and vowed that the government would “coolly and calmly negotiate” over the remaining tariffs. One government figure, granted anonymity to speak about a sensitive area of policy, told POLITICO the key focus of negotiation, at least in the short term, will be the steep sectoral tariffs on steel and automobiles.  There is some optimism about Britain’s prospects of getting a deal on the sectoral tariffs — but those hopes could easily be dashed given Trump’s propensity to change his mind. POOR GERMANY DIDN’T EVEN HAVE A GOVERNMENT! Trump’s on-again, off-again global trade war put great pressure on Germany’s incoming conservative chancellor, Friedrich Merz, to rapidly form a government capable of helping forge a European response. One of Merz’s core election promises to voters was to revitalize Germany’s struggling economy, which has contracted for two years in a row. But Trump’s tariff threats pose a particular risk to Germany’s export-oriented economy, potentially neutralizing many of Merz’s economic initiatives even before he’s had a chance to implement them. Merz now advocates a carrot-and-stick approach when it comes to Trump, supporting tough countermeasures on new tariffs while also pushing for a free-trade agreement with the U.S. “We are determined to fight back, and you can see from this example that [European] unity helps,” Merz said in a German television interview. But, he added, “the best thing we can do is all join together in transatlantic trade and impose 0 percent tariffs and then the problem will be solved.” Gabriel Gavin, Andrew McDonald, James Angelos, Matt Honeycombe-Foster, Koen Verhelst and Joshua Berlinger contributed to this report.

As his global trade war spun further worldwide chaos on Wednesday, with China and the European Union hitting back and the financial fallout spreading to bond markets, President Donald Trump showed no signs of pulling back. On the contrary, he urged anyone increasingly worried about rising recession fears as his tariffs officially took effect, to relax. “BE COOL,” he wrote in a social media post. “Everything is going to work out well. The USA will be bigger and better than ever before!” He followed up in a second post with a line of financial advice, signed with his initials: “THIS IS A GREAT TIME TO BUY!!! DJT” Neither Trump’s nonchalance nor his aides’ spaghetti-at-the-wall — and often contradictory — reassurances and rationales have calmed the markets. If anything, the White House’s public responses from aides defending the president’s trade war on Sunday talk shows combined with his own defiance are adding to the uncertainty that has caused trading indexes to spiral out of control and other countries to respond in kind. After the White House expanded tariffs on all Chinese goods to a remarkable 104 percent, Beijing responded on Wednesday with additional tariffs on imports from the United States for a total of 84 percent. Around the same time, EU member states voted to approve counter-tariffs against the U.S. that would take effect Tuesday, the bloc’s first response to Trump’s tariffs on steel and aluminum from Europe. The retaliatory tariffs will affect nearly €21 billion of U.S. products — everything from soybeans to motorcycles and orange juice — and take effect in three waves. The EU has yet to respond to Trump’s 20 percent “reciprocal” tariffs on all EU exports, which took effect on Wednesday, and his latest 25 percent tariff on cars. And a statement from Brussels made clear that European officials would prefer to find an off-ramp than continue to escalate, noting that the new tariffs can be suspended at any time. “The EU considers U.S. tariffs unjustified and damaging, causing economic harm to both sides, as well as the global economy,” the EU said in the statement. “The EU has stated its clear preference to find negotiated outcomes with the U.S., which would be balanced and mutually beneficial.” The expanding trade war continued to affect financial markets, triggering more losses on Wednesday. Trading on the S&P 500 continued to fluctuate with the index still near bear market territory, a 20 percent drop from a recent peak — a rare and concerning marker for investors. Perhaps more concerning was the spread of the turmoil to government bond markets, thought to be a safe haven during periods of great volatility. Yields on the 10-year Treasury note, which rise when prices fall as investors sell bonds, climbed to 4.37 percent on Wednesday, after rising earlier to 4.5 percent, the highest since February.