Europeans’ world-leading drinking habits are putting their health at risk, but governments are failing to use higher taxes to help curb consumption, warned the World Health Organization. Beer has become more affordable in 11 EU countries since 2022, and less affordable in six, the WHO report revealed Tuesday. There was a similar but even more dramatic trend for spirits, which became more affordable in 17 EU countries and less affordable in two. And for wine, 14 EU countries do not tax it at all, including big producers Italy and Spain, the report found. The EU includes seven of the 10 countries with the highest per-capita alcohol consumption globally, with Romania, Latvia and Czechia among the biggest drinkers. Alcohol is a major driver of cancer, with risk scaling alongside higher consumption. It’s also linked to a wide range of illnesses including cardiovascular disease and depression, all of which are adding pressure to stretched health systems. The WHO said governments should target alcohol consumption to protect people from its ill effects. Increasing the cost of booze through taxes is one of the most effective measures governments can take, the WHO said. Yet, some EU countries have minimal or no taxes on certain types of alcohol. The fact that more than half of EU countries don’t tax wine at all is “unusual” by international standards, WHO economist Anne-Marie Perucic said. She pointed out that the more affordable alcohol is, the more people consume. “Excluding a product is not common. It’s always for political reasons, socio-economic reasons [like] trying to protect the local industry. Clearly, it doesn’t make sense from a health perspective,” Perucic told POLITICO. Those 14 countries span the EU’s northern and central regions, such as Germany, Austria and Bulgaria. “More affordable alcohol drives violence, injuries and disease,” said Etienne Krug, director of the WHO’s department of health determinants, promotion and prevention. “While industry profits, the public often carries the health consequences and society the economic costs.” The EU has touted its plans to protect its wine industry from threats including declining consumption and climate change. EU institutions agreed a package of measures to prop up the sector in December. Meanwhile, the European Commission recently backed down from proposing an EU-wide tax on alcopops; the sweet, pre-mixed alcoholic drinks that taste like sodas, as part of its Safe Hearts plan.  In a separate report, the WHO reported that sugary drinks have also become more affordable in 13 EU countries since 2022, data published in a separate WHO report found. A diet high in sugar is linked to obesity, Type 2 diabetes, heart disease, fatty liver disease and certain cancers.

Faced with an ageing population and rising chronic disease rates, Europe wants to make its citizens healthier. It also needs to keep its most powerful industries happy. In the basket of health policies that EU lawmakers rushed to get across the line before Christmas, industry was the big winner: The pharmaceutical, food and drink sectors walked away with a set of major policy wins — and (potentially) healthier profits. While the pharma industry previously feared losing some of its monopoly rights on new drugs, the Commission this month offered it an extra year of patent protection for novel biotech drugs — among the most expensive treatments in the world. The food and drink sectors, meanwhile, successfully pushed back against proposals to tax ultra-processed foods and alcopops, for now. On Dec. 16 the Commission published its Biotech Act and Safe Hearts Plan, which landed just days after a long-awaited update of the pharmaceutical legislation. Taken together, they seek to incentivize industries to innovate and do business in Europe, improve access to medicines, and tackle the burden of cardiovascular disease. The pharma industry broadly celebrated the biotech proposal. The Biotech Act “reflects priorities we’ve intensively advocated to keep Europe globally competitive in life sciences,” Ognjenka Manojlovic, head of policy at European pharmaceutical company Sanofi, told POLITICO. That includes accelerating clinical trials, boosting intellectual property, and strengthening financing for Europe’s biotech ecosystem, Manojlovic said. The pharmaceutical sector had pushed for longer monopoly rights in the pharma legislation. In the end they were kept at the current standard eight years — instead of being cut by two years as the European Commission had initially proposed. For Europe’s public health insurers, who pay for drugs, the decisions taken to maintain and then extend market protections for medicines are hard to square. “We are puzzled by the Commission’s intentions,” said Yannis Natsis, director of the European Social Insurance Platform, a network of Europe’s social insurance organizations, warning that taxpayers will have to pick up the bill. Meanwhile, health campaigners are also unhappy at the Commission’s “missed opportunity” to tackle obesity and heart disease with junk food taxes — as proposed in an earlier draft of the Safe Hearts Plan. Samuele Tonello, at consumer organization BEUC, said the Safe Hearts Plan “lacks teeth” to better protect consumers from unhealthy foods, and flagged the “urgency of [cardiovascular diseases].”  A MAN ON A MISSION Health Commissioner Olivér Várhelyi has made no secret of his support for industry, and has championed the Commission’s competitiveness mantra since taking office in late 2024. Health Commissioner Olivér Várhelyi has made no secret of his support for industry, and has championed the Commission’s competitiveness mantra since taking office in late 2024. | Thierry Monasse/Getty Images The standout feature of his end-of-year bonanza was the 12-month patent extension in the Biotech Act I — legislation that was split in two late in the day, allowing Várhelyi to meet his end-of-year deadline for the pharma component. The proposal came just a week after the Commission, countries and MEPs clinched a deal to reform Europe’s pharmaceutical laws, in which IP rights were among the last issues to be settled. Updates to the pharma laws were a legacy of the last Commission, whereas the Biotech Act became something of a personal mission for Várhelyi. He repeatedly stressed that there was “no time to lose” in delivering a targeted policy aimed at revitalizing Europe’s flagging biotech industry, which risks being overtaken by competition from China and the U.S. Few commissioners are more vocal than Várhelyi about the premium they place on the competitiveness of European industry.  Industry insiders had heard whispers of his plans to expand IP incentives for the biotech sector, even if Council representatives were dismayed not to have been informed in advance — especially with the ink barely dry on the Pharma Package. That’s not to say pharma is happy with its lot. Industry lobby group the European Federation of Pharmaceutical Industries and Associations (EFPIA) tempered its praise of the Biotech Act, lamenting that the extra year of monopoly rights would only apply to a “limited subset of products.”  The extra year of protection is tied to the Commission’s efforts to locate more pharma research and manufacturing in Europe. It would apply only to new products, tested and at least partially made in Europe.  But the generics sector, which makes cheaper, off-patent drugs to compete with branded medicines, sees the Biotech Act as a further sweetening of what is already one of the world’s most generous IP systems. Lobby group Medicines for Europe claims each year of delayed competition for the top three biologic drugs would cost countries €7.7 billion. Longer IP “will have a dramatic impact on healthcare budgets and delayed patients’ access to essential medicines,” said Adrian van den Hoven, head of the lobby. These kinds of estimates would normally be included in an impact assessment published alongside the proposal, but in its haste to get the Biotech Act out the Commission didn’t do one. POLITICO asked the Commission for an estimate of what the extra year of patent protection would cost. A Commission spokesperson would not give a figure but said they had used the impact assessment for the pharma legislation as a reference. “It is also important to stress that the number of products eligible for an additional year of SPC will be limited to only those that are truly innovative and tested and manufactured in the EU. The approach is deliberately targeted to incentivise genuinely innovative therapies that deliver a clear added value for patients and support European innovation,” the spokesperson said. LUCKY ESCAPE FOR UPFS The big food and drink sectors are on shakier ground with Várhelyi. The commissioner has repeatedly made known his distaste for ultra-processed food, and an early leaked version of the Safe Hearts Plan included new taxes on unhealthy highly processed foods and alcopops. But the final proposal showed the Commission had undertaken a significant climbdown. Concrete targets to tax unhealthy food and drink in 2026 were gone, replaced with a much woollier commitment to “work towards” such a levy. Alcopops were excluded altogether.  Industry lobby FoodDrinkEurope took a far more measured tone on the final plan than its explosive reactions to the earlier leaks, but that may well ramp up again if and when health tax proposals emerge. The text suggests the soft drinks industry may be the Commission’s first target if it does decide to pursue new levies, while UPFs remain in Várhelyi’s sights. “In the next couple of years, we will need to tackle the issue of ultra-processed food much more,” he told MEPs in December. For now, though, the plan seems to have let industry off easy. Health NGOs saw it as a disappointment, given its lack of hard-hitting policies to reduce consumption of UPFs and other unhealthy products. While the pharma legislation is all wrapped up, the Biotech Act still needs to win the approval of EU countries and the European Parliament. For the food and pharma sectors, the proposals set out this month are confirmation they have allies in the Berlaymont.

PARIS — French lawmakers of a nervous disposition, look away now … a member of parliament wants to ban the sale of alcohol in the National Assembly bar! According to a report seen by POLITICO’s Paris Playbook, Emmanuel Duplessy, of the leftist Génération.s party, wants not only to stop the bar from selling booze but also to prohibit MPs from claiming alcohol as part of their food and drink expenses. The sale of alcohol “in a workplace raises many questions among the French,” Duplessy said. Duplessy isn’t the first MP to try and sober up French politics. In May, Green Party leader Cyrielle Chatelain suggested banning alcohol in parliament in the evenings. Arthur Delaporte, a Socialist MP who heads the association that manages the National Assembly’s eateries, said prices in the bar had increased, but if alcohol is excluded from expense claims for lawmakers, then the same rule should apply to “all companies for it to be acceptable.” That, he added, would “cause a stir among lawyers.” Alcohol sales in the lower house of parliament’s bar generated around €100,000 in revenue last year (although there was a pause of around three months in legislative business after the dissolution of parliament). French lawmakers might want to ask their Belgian colleagues for tips about non-alcoholic debates. Beer and wine have been banned in the Belgian federal parliament’s cafeteria since May.

Alcohol has been enjoyed in societies for thousands of years, playing a role in celebrations and gatherings across the world. While misuse continues to cause harm, it’s encouraging to see that, according to World Health Organization data, trends are moving in the right direction. Consumers are better informed and increasingly aware of the benefits of moderation.   While Diageo is only relatively young — founded in 1997 — our roots run deep. Many of our brands date back centuries, some as far back as the 1600s. From iconic names such as Guinness and Johnnie Walker to modern innovations like Tanqueray 0.0, we are proud to continue that legacy by building and sustaining exceptional brands that resonate across generations and geographies. We want to be one of the best performing, most trusted and respected consumer products companies in the world — grounded in a strong sense of responsibility.  That means being transparent about the challenges, proactive in promoting responsible drinking, and collaborative in shaping the future of alcohol policy. We are proud of the progress made, but we know there is more to do. Lasting change requires a whole-of-society approach, bringing together governments, health experts, civil society and the private sector.   We believe a more balanced, evidence-based dialogue is crucial; one that recognizes both the risks of harmful drinking and the opportunities to drive positive change. Our brands are woven into cultural and social traditions around the world, and the industry contributes significantly to employment, local economies and public revenues. Recognizing this broader context is essential to shaping effective, proportionate and collaborative alcohol policies. Public-private collaboration brings together the strengths of different sectors, and these partnerships help scale impactful programs.  > We believe a more balanced, evidence-based dialogue is crucial; one that > recognizes both the risks of harmful drinking and the opportunities to drive > positive change. Across markets, consumers are increasingly choosing to drink more mindfully. Moderation is a long-term trend — whether it’s choosing a non-alcoholic alternative, enjoying fewer drinks of higher quality, or exploring the choice ready-to-drink formats offer, people are drinking better, not more, something Diageo has long advocated. Moderation is not a limitation; it’s a mindset. One of the ways we’re leading in this space is through our expanding non-alcoholic portfolio, including the acquisition of Ritual Beverage Company in the US and our investment in Guinness 0.0. This growing diversity of options empowers individuals to choose what’s right for them, in the moment. Moderation is about choice, and spirits can also offer creative ways to moderate, such as mixing alcoholic and non-alcoholic ingredients to craft serves like the ‘lo-groni’, or opting for a smaller measure in your gin and tonic.  Governments are increasingly taking proportionate approaches to alcohol regulation, recognizing the value of collaboration and evidence-based policy. There’s growing interest in public-private partnerships and regulatory rationality, working together to achieve our shared goal to reduce the harmful use of alcohol. In the UK, underage drinking is at its lowest since records began, thanks in part to initiatives like Challenge 25, a successful public-private collaboration that demonstrates the impact of collective, targeted action.  > Moderation is not a limitation; it’s a mindset. Diageo has long championed responsible drinking through campaigns and programs that are measurable and scalable. Like our responsible drinking campaign, The Magic of Moderate Drinking, which is rolled out across Europe, and our programs such as Sober vs Drink Driving, and Wrong Side of the Road, which are designed to shift behaviors, not just raise awareness. In Ireland, we brought this commitment to life at the All Together Now music, art, food and wellness festival with the launch of the TO.0UCAN pub in 2024, the country’s first-ever non-alcoholic bar at a music festival. Serving Guinness 0.0 on draught, it reimagined the traditional Irish pub experience, offering a fresh and inclusive way for festival-goers to enjoy the full energy and atmosphere of the event without alcohol.  Another example comes from our initiative Smashed. This theatre-based education program, developed by Collingwood Learning and delivered by a network of non-government organizations, educates young people and helps them understand the dangers of underage drinking, while equipping them with the knowledge and confidence to resist peer pressure. Diageo sponsors and enables Smashed to reach millions of young people, teachers and parents across the globe, while ensuring that no  alcohol brands of any kind are mentioned. In 2008, we launched DRINKiQ, a first-of-its-kind platform to help people understand and be informed about alcohol, its effects, and how to enjoy it responsibly. Today, DRINKiQ is a dynamic, mobile-first platform, localized in over 40 markets. It remains a cornerstone of our strategy.  > Diageo has long championed responsible drinking through campaigns and programs > that are measurable and scalable. In the UK, our partnership with the Men’s Sheds Association supports older men’s wellbeing through DRINKiQ. Most recently, this collaboration expanded with Mission: Shoulder to Shoulder, a nationwide initiative where Shedders are building 100 buddy benches to spark over 200,000 conversations annually. The campaign promotes moderation and connection among older men, a cohort most likely to drink at increasing or higher risk levels. Across all our partnerships, we focus on the right message, in the right place, at the right time. They also reflect our belief that reducing harmful drinking requires collective action.  Our message is simple: Diageo is ready to be a proactive partner. Let’s build on the progress made and stay focused on the shared goal: reducing harm. With evidence-based policies, strong partnerships and public engagement, we can foster a drinking culture that is balanced, responsible and sustainable. Together, we can make real progress — for individuals, communities and society as a whole. 

The European Union and the United States have issued a statement to formalize their tariff truce. Now the hard work begins. The framework agreement builds out the handshake trade agreement struck by European Commission President Ursula von der Leyen and U.S. President Donald Trump in Scotland in late July. The text sets out a roadmap for implementing the trade commitments they made. “This is not the end; it’s the beginning. This framework is a first step,” EU Trade Commissioner Maroš Šefcovič said. But the document, which runs to only four pages, skirts several issues. For one, it doesn’t mention U.S. calls for the EU to dilute its regulation of Big Tech. Nor does it refer to a call by Brussels for European wines and spirits to be exempted from the 15 percent U.S. baseline tariff that took effect this month. That’s one that Šefcovič still hopes to get a deal on. We break down the wins, the losses, the fudges — and the omissions — from the Framework on an Agreement on Reciprocal, Fair, and Balanced Trade. CARS  Under the joint statement, the U.S. will lower its 27.5 percent tariffs on cars and automotive parts to match the baseline 15 percent.  But there’s a catch: The U.S. will only meet its lower tariff commitment after the EU eliminates “tariffs on all U.S. industrial goods,” including its own 10 percent tariff on vehicles. Šefčovič said the Commission will initiate legislation this month to ensure Washington lowers tariffs retroactively on cars and auto parts effective Aug. 1, as foreseen in the deal. A separate clause of the joint statement makes clear that the two governments will start collaborating in other areas around cars, including to “provide mutual recognition on each other’s standards.”  The joint statement doesn’t clarify which standards will be mutually recognized, but any change will have ripple effects across the sector. “By signing up to mutual recognition of vehicle standards with the United States, the European Union has waved the white flag on road safety,” said Antonio Avenoso, executive director of the European Transport Safety Council. “This is not a technical detail — it is a political choice that puts trade convenience ahead of saving lives.” — Jordyn Dahl DRUGS, SEMICONDUCTORS, STEEL These industries are at the heart of Washington’s efforts to relocate industry back to the United States and are covered by separate trade investigations, known as Section 232, which allow the U.S. president to restrict imports to protect national security.  The U.S. will cap tariffs on European pharmaceuticals, lumber and semiconductors at 15 percent regardless of the results of the ongoing investigations.  Steel and aluminum imports will continue to face a 50 percent tariff until the EU and the U.S. explore the possibility of joining forces to tackle overproduction. | Erik S. Lesser/EPA This ceiling doesn’t apply to steel and aluminum imports, however, which will continue to face a 50 percent tariff until the EU and the U.S. explore the possibility of joining forces to tackle overproduction — especially coming from China — and the possibility of setting tariff-rate quotas. The European pharmaceuticals industry warns that the outline trade deal could cost companies up to €18 billion. “We remain concerned for the future of patients and our sector in Europe,” said Nathalie Moll, director general at Europe’s EFPIA pharma lobby. Still, while branded pharmaceuticals could end up being subject to the tariffs, the EU did succeed in broadening an exemption for lower-priced generics. — Camille Gijs and Mari Eccles DIGITAL RULES  The European Union managed to keep its rules on digital competition and content moderation out of the U.S. trade deal, despite heavy pressure. For now.  The Commission has for months maintained that its ability to regulate U.S. Big Tech companies is not part of the trade negotiations.  The Trump administration has been on a campaign, attacking both rulebooks and claiming they amount to censorship of Americans (the Digital Services Act) and unfairly target U.S. companies (the Digital Markets Act). While Šefčovič confirmed to reporters on Thursday that the rules weren’t part of the talks, he didn’t rule out that the two sides would return to the issue in the future.  “We kept these issues out of the trade negotiations. We were focusing on what was very clearly the priority and therefore you won’t find it referenced in the joint statement,” he said. “Will it come later, will it be discussed? Our relationship is so vast that for sure there will be a lot of issues which will be discussed.” European Parliament lawmakers will continue to pressure the Commission not to treat the rules as a bargaining chip. “Tech legislation and tariffs are two distinct matters and should remain such,” said Bulgarian conservative lawmaker Eva Maydell. — Pieter Haeck WINES AND SPIRITS Wines and spirits won’t be exempted from tariffs, even though the European Union pushed hard to obtain relief for a sector that has been caught in the crossfire from both Washington and Beijing. This means they will be subject to a 15 percent U.S. tariff.  That’s a blow for European exporters, who long benefited from tariff-free access on most spirits until successive trade wars tore it up. Wines and spirits won’t be exempted from tariffs, even though the European Union pushed hard to obtain relief for a sector that has been caught in the crossfire from both Washington and Beijing. | Guillaume Horcajuelo/EPA Šefčovič admitted that the talks had fallen short — but insisted the fight isn’t over.  “The tariffs on wine and spirits was one of the very important offensive interests of the European Union. Unfortunately, here we didn’t succeed … but the doors are not closed forever,” he told reporters.  — Bartosz Brzeziński GREEN RULES  The EU made a vague promise to address U.S. concerns regarding EU laws on mandatory sustainability reporting (the Corporate Sustainability Reporting Directive), supply chain oversight (the Corporate Sustainability Due Diligence Directive) and deforestation (the EU Deforestation Regulation). Brussels mainly pitched ideas it already wants to implement, however.   The EU will ensure its rules “do not pose undue restrictions on transatlantic trade” by reducing the administrative burden on businesses in the CSDDD and by proposing changes to the EU’s civil liability regime, which holds companies legally accountable for human rights violations and environmental damage in their supply chains.   Scrapping the EU’s liability regime is already a major point in the Commission’s omnibus proposal announced last February, which rolls back many features of the CSRD and CSDDD among other files.  Crucially, those changes have not yet received the official green light from EU countries or lawmakers.   On deforestation, the EU says it recognizes that U.S. commodities production “poses negligible risk to global deforestation,” having already labeled the country as “low risk” in its classification system last May.  — Marianne Gros AVIATION Washington commits to exempting aircraft and parts from higher tariffs, applying its very low most favored nation duties to the industry. Irish lobbyists are breathing a collective sigh of relief. A trade war slapping American tariffs on Airbus and European tariffs on Boeing would have hit the industry’s key middleman, Dublin, particularly hard. The Irish capital is the world’s biggest hub for aircraft leasing with an ecosystem of lessors and financial advisers overseeing most of the world’s leased aircraft. Ireland’s Central Statistics Office values that Irish-managed fleet at €268 billion.  Small wonder, then, that Prime Minister Micheál Martin singled out aviation when welcoming the newly published details of the EU-U.S. agreement. “Given the significance of the airline sector to Ireland, a specific carve-out for aircraft and aircraft parts is welcome,” he said. — Shawn Pogatchnik DEFENSE  The EU promised to buy more American weapons under Thursday’s trade deal, although a senior official downplayed any impact on efforts to boost Europe’s military industrial complex. The EU “plans to substantially increase procurement of military and defence equipment from the United States, with the support and facilitation of the U.S. government,” the joint statement said.  That could deal a blow to the European defense industry, which Brussels has been trying to strengthen with initiatives like the €150 billion loans-for-weapons Security Action for Europe regulation to boost joint procurement, or the €1.5 billion European Defence Industry Programme still under discussion with the European Parliament. — Jacopo Barigazzi INVESTMENTS Although it’s unclear how exactly it will fulfill its promises, the EU “intends to” procure $750 billion worth of U.S. energy, including liquefied natural gas, oil and nuclear energy products, through 2028.  It will also buy “at least” $40 billion worth of U.S. artificial intelligence chips. Europe already relies heavily on U.S.-based AI chip suppliers such as Nvidia, since it has no own-production capacity in that space.  On top of that, “European companies are expected to invest an additional $600 billion across strategic sectors in the United States through 2028,” the document adds. — Camille Gijs and Pieter Haeck

Production of hard liquor has collapsed in Russia — even as data shows that citizens are drinking more strong alcohol than ever before. Russia’s Federal Service for Alcohol Market Regulation reported this week that manufacturing of spirits declined by more than 16 percent in the first half of 2025. Official data shows that vodka production is down by 10.9 percent year on year, from 33.40 million decaliters in 2024 to 31.38 million decaliters in the corresponding period in 2025. The legendary Russian beverage was, for a time in the 1990s, used as a national currency and remains a celebrated part of the country’s culture to this day. However, while production is down, consumption is up. Russians drunk more in 2024 than at similar stages in the last eight years. And more and more people prefer rum, whiskey, brandy and tequila, a Russian financial auditing firm, Finexpertisa, reported in May. At the same time, Russian President Vladimir Putin said that Russians are starting to drink less, claiming more of them prefer sports. “Quit drinking and start skiing,” he joked. The sales of those products grew by 10.2 percent to 3.2 liters a year per capita person, surpassing vodka consumption in some regions. But vodka is still the top drink of choice throughout the country, holding 60 percent of sales annually. The decline in vodka production in Russia was triggered by rising alcohol prices and the ban on the export of alcoholic beverages to the EU, the U.S. and other countries, due to Western sanctions. This ban has significantly reduced export revenue for Russian vodka producers, a state product quality control service in the Rostov region reported in June, citing data from the Strategy Partners consulting agency.

Brussels and Beijing got 99 problems — but an upcoming high-level summit ain’t gonna solve a single one. When EU leaders Ursula von der Leyen and António Costa travel to China in two weeks, they will have several concerns in their travel bags — from market access to China’s chokehold over strategic raw materials. America’s lurch into protectionism under President Donald Trump is disturbing trade flows, meanwhile, making it harder to resolve those thorny issues. Von der Leyen reeled off a litany of political and economic complaints on Tuesday — from China’s state-subsidized overproduction to price gouging, “systematic” discrimination against foreign companies, export restrictions and more — setting the tone for a contentious summit.  “China has an entirely different system,” she said in an address to European lawmakers. The country has “unique instruments at its disposal to play outside the rules,” allowing it “to flood global markets with subsidized overcapacity — not just to boost its own industries, but to choke international competition.” And the pain points are multiplying: The latest is a move by Beijing to restrict government purchases of EU medical devices, in retaliation for a similar ban on Chinese medical equipment imposed by Brussels last month. Those come on top of a lingering dispute over the EU’s imposition of duties on Chinese-made electric vehicles last year and retaliatory duties slapped by Beijing on European liquor. Despite the milestone it’s supposed to celebrate — the 50th anniversary of EU-China diplomatic ties — the summit is shaping up to be more symbolic than substantive. With both sides entangled in trade spats, expectations are at a new low. Officials are bracing for a summit that’s going to be more about saving face than achieving concrete results. While Brussels and Beijing usually alternate as summit hosts, Chinese President Xi Jinping snubbed EU leaders earlier this year by declining an invitation to come to Brussels. The summit — originally planned to run for two days — will now only take place on July 24 in Beijing. It’s still unlikely that Xi will attend the gathering, which will be chaired by Premier Li Qiang, China’s second-ranked leader. Xi might yet meet bilaterally with von der Leyen and Costa, but that is TBC. “Not only doesn’t he [Xi] show up in Brussels, he doesn’t even attend in Beijing … it’s so embarrassing, I would not take it over my dead body, I swear,” said Alicia García-Herrero, chief economist for Asia-Pacific at French investment bank Natixis and a senior fellow at Bruegel, a think tank. “As a European I would say: Do not go, do not accept this shit.” MOOD SHIFT What’s more, the EU and the U.S. are scrambling to seal a provisional trade deal ahead of Trump’s (newly postponed) deadline to reimpose sweeping tariffs on Aug. 1. Should that happen before the EU-China summit, it’s bound to spell further trouble for the meeting. “If the EU and the U.S. are going to seal a similar deal to [the deal the U.S. sealed with the U.K.], other trading partners will be put at a disadvantage and China will retaliate,” said a person from the Chinese business sector who was granted anonymity to speak candidly. In an attempt to find common ground with Trump, von der Leyen has hardened her tone toward Beijing, accusing China at a G7 summit in Canada last month of “weaponizing” its leading position in producing and refining critical raw materials.  Unsurprisingly, those comments didn’t land well. Guo Jiakun, spokesperson for China’s Ministry of Foreign Affairs, hit back at von der Leyen’s remarks on raw materials. Beijing “fully considered the reasonable needs and concerns of various countries, and reviewed export license applications in accordance with laws and regulations,” Guo said. Von der Leyen’s remarks were “quite hawkish and unsettling,” said the person from the Chinese business sector quoted above. “If [von der Leyen] was trying to charm Trump, she may have done so at the cost of credibility — reminding China that the EU can talk cooperation with China one day and posture like a Cold Warrior the next,” they added. In short: The mood is sour — at a time when neither side, and especially the EU, can afford it. In a sign of its concerns over trade imbalances with China, Brussels launched a tool in April to monitor the diversion of trade flows toward the bloc after Trump imposed tariffs of up to 145 percent on Chinese goods (later lowered to 30 percent). While it’s too early to identify a clear trend, Chinese exports to Europe are sharply up in sectors including chemicals, textiles and machinery. HUGE UNCERTAINTY When the summit was announced — days before Trump’s inauguration in January — the EU struck an amicable tone, broadcasting its willingness to rekindle its relationship with China amid uneasy transatlantic relations. Nearly six months on, however, there has been scant progress toward resolving bilateral disputes. And the Chinese commerce ministry has warned “any country” against sealing trade deals with the U.S. that “undermine Chinese interests.” “The situation is not good. The European Union has 70 percent of its exports to the United States aimed at new tariffs. We are facing trade diversion because of some of the actions being taken, and there’s a huge uncertainty in the trade world,” Maria Martin-Prat De Abreu, a senior official at the Commission’s trade department who is in charge of the EU’s China policy, told an event last month. On top of rifts over electric vehicles, medical devices, spirits and pork, China has imposed — as part of its retaliation against Washington — additional controls on exports of rare earths. Those are inevitably hitting EU countries as well. Although EU trade chief Maroš Šefčovič has managed to negotiate faster permitting procedures for European companies, industry continues to sound the alarm over threats to supply chains for the manufacture of everything from smartphones to car engines. China provides almost 99 percent of the EU’s supply of the 17 rare earths. In a reflection of the frosty relations between Brussels and Beijing, the two sides don’t plan to issue a joint statement summing up their mutual commitments, departing from the usual practice in international diplomacy. The EU and China are instead looking at publishing a mere press release, two EU officials said, just like they did in 2023. “There’s a huge amount of work that needs to be done between now and the summit,” said Martin-Prat De Abreu, adding that Brussels and Beijing were focusing on both “general, structural issues” and more specific issues such as market access for agricultural goods and cosmetics. “It is very difficult,” she added. What’s more, the usual high-level trade dialogue that typically precedes the summit won’t be held due to the lack of progress on trade issues, according to a person from the Chinese business sector and a European official. And Brussels is refusing to sign a joint declaration on climate action unless China pledges greater efforts to slash its greenhouse gas emissions, Climate Commissioner Wopke Hoekstra told the Financial Times. “It’s not that we shut the door,” a third EU official said. “It’s more that we never opened it. We’re sending a signal to both China and the United States.” This story has been updated.

BRUSSELS — Romania’s fledgling government is made up of the country’s most pro-European politicians, but that hasn’t stopped them citing Brussels as a key reason why they need to impose a drastic set of tax hikes and spending cuts to avert financial collapse. For the past five years, Romania has been spending way beyond its means — in the words of new President Nicușor Dan, eating a large pizza while only paying for a medium-sized one — and has a projected budget deficit of around 9 percent of economic output this year, the highest in the European Union.  That record of poor fiscal management has provoked repeated reprimands from the European Commission, which Prime Minister Ilie Bolojan now says can no longer be ignored. This week, ministers from EU countries will vote to decide on a strict plan setting out exactly what Romania must now do to restore order to its public finances.  Even before Tuesday’s vote in a meeting of EU economy and finance ministers, Romania’s new prime minister is pushing through a dramatic package of austerity measures that will deal a blow to economic growth, as well as hammer the government’s popularity.  But without action now, Bolojan argues, the country will face the wrath of the Commission and — worse than that — the prospect of a downgrade from credit rating agencies, potentially reducing Romanian government debt to “junk” status. That would risk a spiraling financial meltdown, and the prime minister has warned of the risk to salaries and pensions if the country’s creditors lose faith.  “Access to European funds is conditional on fiscal reform; without it, we would lose access to these funds,” Bolojan told reporters last week. “Think about what it would mean if we could not continue half of the investments currently underway, in major highways, rail lines, and projects in every locality across Romania. This would place us at risk of being downgraded again into so-called junk status, making our country unattractive to investors.” He added: “We cannot let our country end up in a situation like Greece.” Speaking in an interview with the Antena 3 CNN channel, Bolojan said Romania’s previous approach of promising its creditors and the EU that it will reduce its deficit, only to keep spending more than it can afford, resembled the fable of the boy who cried wolf. “Given that you often announce that it will happen and it doesn’t happen, when that thing really happens, no one believes you that it will happen and no one helps you anymore,” he said.  ‘AUTUMN OF DISCONTENT’ The fiscal crisis is a huge test for the new administration of Dan, the centrist former mayor of Bucharest, who was elected president in May. He saw off a challenge from far-right populist George Simion to win the presidency, promising to clean up corruption, keep Romania on its pro-Western path supporting Ukraine, and to tackle the country’s ballooning debts.  Dan said before he was elected that he was opposed to raising VAT, but Bolojan’s package of reforms envisages large increases in these taxes, including on food, alongside other painful measures such as capping public sector pensions and salaries, requiring teachers to work longer hours, increasing excise duties on fuel, alcohol and tobacco, and taxing gambling winnings and bank profits.  The first tranche of these reforms is due to come into force in August, with the second phase starting Jan. 1 next year. Bolojan must pass his reforms through Romania’s parliament, though most observers believe the four-party coalition will remain united and that this legislative step will not prove to be a major hurdle for the prime minister.  The public reaction is another matter. “We will see the PM and the parties of government fall in the polls,” said Radu Magdin, a former Romanian government adviser who is now CEO of Smartlink Communications. While riots are “less likely,” public protests may follow the next fiscal packages, he said. “The advantage the government has is that it’s summertime. The disadvantage is the autumn of discontent coming in September, after the holidays.” Romania’s new prime minister is pushing through a dramatic package of austerity measures that will deal a blow to economic growth. | Robert Ghement/EFE via EPA On Tuesday, the EU’s finance ministers will set the parameters for what Brussels wants to see from Bucharest’s reform plans, though it’s not likely that they will have had a chance to take account of Bolojan’s latest austerity blueprint. Romania will then have until Oct. 15 to produce a budget that meets the EU’s requirements for reducing its deficit.  According to Daniel Dăianu, chair of the Romanian Fiscal Council, which advises the government on spending, the country must bring the deficit down to below 6.5 percent of gross domestic product by 2026.  “Expenditures cuts and tax increases will affect GDP growth, but they are unavoidable,”  Dăianu said in a recent presentation. 

Beijing will exempt major French cognac producers while slapping duties of up to 34.9 percent on European brandy as of July 5 for a period of five years, the Chinese commerce ministry announced on Friday. The duties will range from 27.7 to 34.9 percent, although Beijing will exempt major brandy producers Remy Cointreau, Pernod Ricard and LVMH’s Hennessy, which have committed to exporting their spirits above a certain price. The average duty comes in at 32.2 percent, which is below the provisional rate of up to 39 percent Beijing has applied since last October. “The measures will still pose a significant barrier to legitimate trade,” spiritsEUROPE, an industry group, said in a statement. The announcement adds to headaches already piling up in the lead-up to a summit in China on July 24 and 25. Beijing is reportedly expected to cancel the second part of the summit. China issued its final ruling Friday in an investigation it started in response to an EU probe into electric vehicle subsidies that led Brussels to impose duties on Made-in-China EVs of up to 35 percent last October. The move targeted French luxury cognac brands, reflecting Beijing’s displeasure at France’s perceived support for the EV probe. In parallel, Beijing and Brussels have been negotiating on minimum import prices for electric vehicles for months — although they have yet to find an agreement. “This decision marks the end of the anti-dumping investigation, but not the end of our efforts to ensure that all our exporters regain unhindered access to the Chinese market as quickly as possible,” said Florent Morillon, president of France’s cognac governing body BNIC. The announcement comes shortly before French Foreign Minister Jean-Noël Barrot was due to meet his Chinese counterpart Wang Yi, who is touring European capitals this week.

BRUSSELS — The outline of a trade deal between the EU and the U.S. is taking shape. It would contain a baseline 10 percent U.S. tariff, relief for specific industries and an “up-front” U.S. commitment to tariff relief, four diplomats told POLITICO. A first nonbinding, political deal can be done before a July 8 deadline set by U.S. President Donald Trump to do a deal or face 50 percent “reciprocal” tariffs. But there are still many details to iron out in the few days that remain, the diplomats said after being briefed on Monday by top European Commission officials Björn Seibert and Sabine Weyand. Even if such an “agreement in principle” is locked in, many details and disagreements are expected to remain unresolved beyond the deadline. Brussels is pushing to secure a U.S. commitment to “up-front” tariff relief at the time of the agreement in principle, according to the diplomats. This would resemble a deal already struck by the U.K. with Washington, which offered tariff exemptions on auto and steel exports while talks on a comprehensive deal continue. A number of EU countries told the Commission no deal of any kind would be possible without such relief. In other words: the U.S. will need to budge if the EU is to accept a 10 percent baseline. EU Trade Commissioner Maroš Šefčovič is flying to Washington for a crunch round of talks on Thursday with U.S. Trade Representative Jamieson Greer. He is due to brief EU countries on their outcome on Friday. In this potentially decisive round, Šefčovič is expected to signal that the EU still hopes to reduce the 10 baseline tariff that Trump imposed on most U.S. trading partners in April. However, under certain conditions, the bloc will say it could accept the 10 percent, according to the diplomats, who were granted anonymity to speak candidly about the closed-door talks. Second, the EU is pushing for lower rates for key sectors, such as pharmaceuticals, semiconductors, alcohol and commercial aircraft — as sought by German Chancellor Friedrich Merz. The Commission, however, “sees the chance for this happening as quite small,” one of the diplomats said. Additionally, Brussels still hopes to bargain down Washington’s tariffs of 25 percent on cars and 50 percent on steel and aluminum. According to another diplomat, concessions on steel are most likely, while the first diplomat quoted above said the idea would be to “create a ring of protection” around the EU and the U.S. against Chinese overproduction. FOUR SCENARIOS The EU is considering four scenarios in its dealings with the U.S., two of the diplomats shared.  Of the four, the worst is a complete breakdown in talks, leading the U.S. to hike its baseline 10 percent tariff to 50 percent and slap additional tariffs on products like pharma and semiconductors. A slightly better situation would be to continue talking during the summer months, while existing tariffs remain in force.  Concluding negotiations on a framework that encompasses the tariffs and cooperating on countering China’s industrial might would be the best, but even in that case the EU is realistic it will need to swallow some one-sided U.S. measures. An agreement in principle would be the precursor to this, and such a deal might push potential EU retaliation — which is currently paused until July 14 — into the medium term. So far, EU member countries have backed a first round of retaliatory measures on paper but a second, far larger one, remains under consideration. The diplomats increasingly consider a complete breakdown of talks to be unlikely, with several pointing out that talks are likely to continue should the two sides fail to reach an agreement by July 8.  EU member countries are trying their best to display unity and back the EU executive’s goal of sealing a deal with Trump — despite not always seeing eye-to-eye on how to best deal with the White House.  Berlin and Rome are among the most outspoken proponents of a fast deal, even if that means making greater concessions to Trump. “Rome seems quite keen to maintain good relationships and willing to accept a lot,” one of the diplomats said. Prime Minister Giorgia Meloni — a MAGA favorite — said last week that the 10 percent U.S. tariff is “not particularly impactful for us.” Others, like Spain, have already experienced the repercussions of pushing hard against Trump. Last week, the U.S. President threatened new tariffs on Madrid after Prime Minister Pedro Sánchez refused to increase defense spending in line with other NATO allies — even though that wouldn’t be feasible as the EU’s 27 members operate as a trade bloc. Antonia Zimmermann and Koen Verhelst reported from Brussels, and Hans von der Burchard from Berlin. Camille Gijs contributed reporting. This story has been updated.