LONDON — Keir Starmer is off to China to try to lock in some economic wins he can shout about back home. But some of the trickiest trade issues are already being placed firmly in the “too difficult” box. The U.K.’s trade ministry quietly dispatched several delegations to Beijing over the fall to hash out deals with the Chinese commerce ministry and lay the groundwork for the British prime minister’s visit, which gets going in earnest Wednesday. But the visit comes as Britain faces growing pressure from its Western allies to combat Chinese industrial overproduction — and just weeks after Starmer handed his trade chief new powers to move faster in imposing tariffs on cheap, subsidized imports from countries like China. For now, then, the aim is to secure progress in areas that are seen as less sensitive. Starmer’s delegation of CEOs and chairs will split their time between Beijing and Shanghai, with executives representing City giants and high-profile British brands including HSBC, Standard Chartered, Schroders, and the London Stock Exchange Group, alongside AstraZeneca, Jaguar Land Rover, Octopus Energy, and Brompton filling out the cast list. Starmer will be flanked on his visit by Trade Secretary Peter Kyle and City Minister Lucy Rigby. Despite the weighty delegation, ministers insist the approach is deliberately narrow. “We have a very clear-eyed approach when it comes to China,” Security Minister Dan Jarvis said Monday. “Where it is in our national interest to cooperate and work closely with [China], then we will do so. But when it’s our national security interest to safeguard against the threats that [they] pose, we will absolutely do that.” Starmer’s wishlist will be carefully calibrated not to rock the boat. Drumming up Chinese cash for heavy energy infrastructure, including sensitive wind turbine technology, is off the table. Instead, the U.K. has been pushing for lower whisky tariffs, improved market access for services firms, recognition of professional qualifications, banking and insurance licences for British companies operating in China, easier cross-border investment, and visa-free travel for short stays. With China fiercely protective of its domestic market, some of those asks will be easier said than done. Here’s POLITICO’s pro guide to where it could get bumpy. CHAMPIONING THE CITY OF LONDON Britain’s share of China’s services market was a modest 2.7 percent in 2024 — and U.K. firms are itching for more work in the country. British officials have been pushing for recognition of professional qualifications for accountants, designers and architects — which would allow professionals to practice in China without re-licensing locally — and visa-free travel for short stays. Vocational accreditation is a “long-standing issue” in the bilateral relationship, with “little movement” so far on persuading Beijing to recognize U.K. professional credentials as equivalent to its own, according to a senior industry representative familiar with the talks, who, like others in this report, was granted anonymity to speak freely. But while the U.K.’s allies in the European Union and the U.S. have imposed tariffs on Chinese EVs, the U.K. has resisted pressure to do so. | Jessica Lee/EPA Britain is one of the few developed countries still missing from China’s visa-free list, which now includes France, Germany, Italy, Spain, the Netherlands, Switzerland, Australia, New Zealand, Japan, Saudi Arabia, Russia and Sweden.  Starmer is hoping to mirror a deal struck by Canadian PM Mark Carney, whose own China visit unlocked visa-free travel for Canadians.  The hope is that easier business travel will reduce friction and make it easier for people to travel and explore opportunities on the ground — it would allow visa-free travel for British citizens, giving them the ability to travel for tourism, attend business conferences, visit friends and family, and participate in short exchange activities.  SMOOTHING FINANCIAL FLOWS The Financial Conduct Authority’s Chair Ashley Alder is also flying out to Beijing, hoping to secure closer alignment between the two countries’ capital markets. He’ll represent Britain’s financial watchdog at the inaugural U.K-China Financial Working Group in Beijing — and bang the drum for better market connectivity between the U.K. and China. Expect emphasis on the cross-border investments mechanism known as the Shanghai-London and Shenzhen-London Stock Connect, plus data sovereignty issues associated with Chinese companies jointly listing on the London Stock Exchange, two figures familiar with the planning said. The Stock Connect opened up both markets to investors in 2019 which, according to FCA Chair Ashley Alder, led to listings worth almost $6 billion. “Technical obstacles have so far prevented us from realizing Stock Connect’s full potential,” Alder said in a speech last year. Alder pointed to a memorandum of understanding being drawn up between the FCA and China’s National Financial Regulatory Administration, which he said is “critical” to allow information to be shared quickly and for firms to be supervised across borders. But that raises its own concerns about Chinese use of data. “The goods wins are easier,” said a senior British business representative briefed on the talks. “Some of the service ones are more difficult.” TAPPING INTO CHINA’S BIOTECH BOOM Pharma executives, including AstraZeneca’s CEO Pascal Soriot, are among those heading to China, as Britain tries to burnish its credentials as a global life sciences hub — and attract foreign direct investment. China, once known mainly for generics — cheaper versions of branded medicine that deliver the same treatment — has rapidly emerged as a pharma powerhouse. According to ING Bank’s global healthcare lead, Stephen Farrelly, the country has “effectively replaced Europe” as a center of innovation. ING data shows China’s share of global innovative drug approvals jumped from just 4 percent in 2014 to 27 percent in 2024. Pharma executives, including AstraZeneca’s CEO Pascal Soriot, are among those heading to China, as Britain tries to burnish its credentials as a global life sciences hub — and attract foreign direct investment. | John G. Mabanglo/EPA Several blockbuster drug patents are set to expire in the coming years, opening the door for cheaper generic competitors. To refill thinning pipelines, drugmakers are increasingly turning to biotech companies. British pharma giant GSK signed a licensing deal with Chinese biotech firm Hengrui Pharma last July. “Because of the increasing relevance of China, the big pharma industry and the U.K. by definition is now looking to China as a source of those new innovative therapies,” Farrelly said. There are already signs of progress. Science Minister Patrick Vallance said late last year that the U.K. and China are ready to work together in “uncontroversial” areas, including health, after talks with his Chinese counterpart. AstraZeneca, the University of Cambridge and Beijing municipal parties have already signed a partnership to share expertise. And earlier this year, the U.K. announced plans to become a “global first choice for clinical trials.” “The U.K. can really help China with the trust gap” when it comes to getting drugs onto the market, said Quin Wills, CEO of Ochre, a biotech company operating in New York, Oxford and Taiwan. “The U.K. could become a global gold stamp for China. We could be like a regulatory bridgehead where [healthcare regulator] MHRA, now separate from the EU since Brexit, can do its own thing and can maybe offer a 150-day streamlined clinical approval process for China as part of a broader agreement.” SLASHING WHISKY TARIFFS  The U.K. has also been pushing for lowered tariffs on whisky alongside wider agri-food market access, according to two of the industry figures familiar with the planning cited earlier. Talks at the end of 2024 between then-Trade Secretary Jonathan Reynolds and his Chinese counterpart ended Covid-era restrictions on exports, reopening pork market access. But in February 2025 China doubled its import tariffs on brandy and whisky, removing its provisional 5 percent tariff and applying the 10 percent most-favored-nation rate. “The whisky and brandy issue became China leverage,” said the senior British business representative briefed on the talks. “I think that they’re probably going to get rid of the tariff.”  It’s not yet clear how China would lower whisky tariffs without breaching World Trade Organization rules, which say it would have to lower its tariffs to all other countries too. INDUSTRIAL TENSIONS The trip comes as the U.K. faces growing international pressure to take a tougher line on Chinese industrial overproduction, particularly of steel and electric cars. But in February 2025 China doubled its import tariffs on brandy and whisky, removing its provisional 5 percent tariff and applying the 10 percent most-favored-nation rate. | Yonhap/EPA But while the U.K.’s allies in the European Union and the U.S. have imposed tariffs on Chinese EVs, the U.K. has resisted pressure to do so. There’s a deal “in the works” between Chinese EV maker and Jaguar Land Rover, said the senior British business representative briefed on the talks quoted higher, where the two are “looking for a big investment announcement. But nothing has been agreed.” The deal would see the Chinese EV maker use JLR’s factory in the U.K. to build cars in Britain, the FT reported last week. “Chinese companies are increasingly focused on localising their operations,” said another business representative familiar with the talks, noting Chinese EV makers are “realising that just flaunting their products overseas won’t be a sustainable long term model.” It’s unlikely Starmer will land a deal on heavy energy infrastructure, including wind turbine technology, that could leave Britain vulnerable to China. The U.K. has still not decided whether to let Ming Yang, a Chinese firm, invest £1.5 billion in a wind farm off the coast of Scotland.

Listen on * Spotify * Apple Music * Amazon Music Donald Trump nutzt seine Rede beim World Economic Forum in Davos für eine klare America-First-Botschaft. Weniger eskalierend als befürchtet, aber ohne Zugeständnisse an Europa. Die zentrale Frage: Was folgt daraus für die transatlantischen Beziehungen – und was ist Europas Antwort? Gordon Repinski mit der Einordnung von Trumps Auftritt, die Erwartungen an Friedrich Merz und der wachsende Handlungsdruck auf Europa. Dazu im Gespräch: Jonathan Martin von POLITICO in Washington. Er ordnet ein nach welchen Mustern Trump agiert und warum Börsen und Märkte dabei eine größere Rolle spielen als diplomatische Appelle. Im 200-Sekunden-Interview spricht die stellvertretende SPD-Fraktionsvorsitzenden Siemtje Möller über Grönland, europäische Souveränität und die Frage, ob Europa mehr tut als nur zu reagieren.  Anschließend richtet sich mit Hans von der Burchard der Blick nach Brüssel: Beim EU-Sondergipfel treffen die Staats- und Regierungschefs aufeinander, um über Zölle, Sicherheitspolitik und die durch das EU-Parlament abgelehnte Mercosur-Ratifizierung zu beraten. Das Berlin Playbook als Podcast gibt es jeden Morgen ab 5 Uhr. Gordon Repinski und das POLITICO-Team liefern Politik zum Hören – kompakt, international, hintergründig. Für alle Hauptstadt-Profis: Der Berlin Playbook-Newsletter bietet jeden Morgen die wichtigsten Themen und Einordnungen. Jetzt kostenlos abonnieren. Mehr von Host und POLITICO Executive Editor Gordon Repinski: Instagram: @gordon.repinski | X: @GordonRepinski. POLITICO Deutschland – ein Angebot der Axel Springer Deutschland GmbH Axel-Springer-Straße 65, 10888 Berlin Tel: +49 (30) 2591 0 information@axelspringer.de Sitz: Amtsgericht Berlin-Charlottenburg, HRB 196159 B USt-IdNr: DE 214 852 390 Geschäftsführer: Carolin Hulshoff Pol, Mathias Sanchez Luna

Europe is laying the foundation for renewed economic growth. Regulatory simplification is gaining traction. Public investment is accelerating in technology, energy and defense. Private capital is supplementing these efforts. These are meaningful steps, which, in the eyes of many, are long overdue and still need to gain pace. But an additional ingredient is required.  Our new research finds that closing the continent’s competitiveness gap requires Europe’s major companies to place a new emphasis on entrepreneurial courage: that is, the increased willingness to embrace uncertainty and take calculated risks in service of renewal and growth. Corporate leaders willing to make bold investments and engage in modern public-private collaborations, much like their American and Asian peers, stand to reap the rewards for acting decisively and with greater urgency.   Europe’s global competitiveness is ultimately a function of individual companies making a material difference, particularly large corporations and dynamic scale-ups. And it doesn’t require many acting boldly to have a disproportionate impact. In examining a sample representing about 15 percent of the U.S. economy, the McKinsey Global Institute found that more than two-thirds of productivity growth between 2011 and 2019 was driven by just 44 ‘standout’ companies. Meanwhile, 13 standout companies drove a similar proportion of the German sample’s productivity growth during the same period. These highly valued ‘outliers’, together with differences in growth and return on invested capital, underpin much of the valuation gap between European companies and their international peers, as highlighted in research we conducted on UK capital markets.   The status quo is not tenable.  Since the global financial crisis, Europe has endured a prolonged slump in private investment that has been especially pronounced in future-shaping industries. In the past five years alone, our analysis found that companies with headquarters in the United States have invested €2 trillion more in digital technologies such as artificial intelligence (AI) than their European peers. And in traditional manufacturing industries, China is out-investing Europe at a rate of 3:1.  > This investment gap not only stifles European economic growth, but prevents > the continent from inventing, developing and deploying the technologies it > needs to increase productivity and drive prosperity.  And the need to boost investments is growing: when the landmark Draghi report on European competitiveness was released in 2024, it estimated that an additional €800 billion needed to be mobilized annually to start closing the continent’s competitiveness gap. With the required additional investment in defense, that figure is now estimated to be €1.2 trillion annually for the next five years.  Of course, the regulatory landscape is also important. The positive news over the past year is that the European Commission has implemented dozens of initiatives, from regulatory simplification to streamlining and enhancing funding and market-creation mechanisms, as well as preparing to propose a ‘28th regime’ to make it easier for companies to scale across its 27 member states. Governments are also stepping up, with growth in strategic public investment in technology, energy and defense capabilities creating tailwinds for private investment. For instance, Germany amended its constitution to exempt defense spending above 1 percent of GDP from its debt brake and established a €500 billion fund to support infrastructure and climate-neutral investment. Similar programs are taking shape in France, Italy, the Netherlands and the Nordics.  But, while private sector activity shows some signs of acceleration, more is needed. Driving Europe’s economic vitality requires the emergence of standout companies, acting both individually and in close collaboration with the public sector. Without it, Europe risks another decade of ‘secular stagnation’: sluggish real GDP growth of around 1 percent annually as excess savings and a dearth of investment depress aggregate demand and push interest rates back to near zero.  > So, what does it take to show more entrepreneurial courage? Informed by our > global research and what we see standout firms doing, our research highlights > a range of actions leaders could explore.  One example is making broader ecosystem plays, such as semiconductor company ASML joining with the Dutch government and regional partners to launch Project Beethoven, a €2.5 billion public-private investment to ensure ASML’s continued presence and expansion of the broader microchip cluster in Eindhoven. Another is re-inventing potential stranded assets to position them for the industries of the future, illustrated by the range of European utilities converting or marketing former coal and gas power plant sites for hyperscale data centers. And a clear one is radical adoption of AI and automation technologies, which MGI’s research shows could add up to 3.4 percentage points to annual productivity growth globally through 2040.  > Europe has an opportunity to take steps to decisively alter its competitive > trajectory.  But while public sector leaders can lay the foundations necessary to accelerate investment and growth, the continent’s leading companies are distinctly positioned to amplify this and make a critical contribution to the continent’s prosperity, security and strategic autonomy. There’s growing consensus on what needs to be done. What’s now needed is a hefty dose of entrepreneurial courage to act.

BRUSSELS — The U.S. must preserve and grow the dominance of its financial sector worldwide, President Donald Trump argues in his new National Security Strategy. The 33-page document is a rare formal explanation of Trump’s foreign policy worldview by his administration, and can shape U.S. policy priorities. “The United States boasts the world’s leading financial and capital markets, which are pillars of American influence that afford policymakers significant leverage and tools to advance America’s national security priorities,” the document states. “But our leadership position cannot be taken for granted,” it continues, calling on America to leverage “our dynamic free market system and our leadership in digital finance and innovation to ensure that our markets continue to be the most dynamic, liquid, and secure and remain the envy of the world.” The strategy lists the “world’s leading financial system and capital markets, including the dollar’s global reserve currency status” as one of the U.S. key levers of power. Trump’s comments come as Europe looks to grow its own finance system to reduce the continent’s dependence on Wall Street. The EU has put forward a broad plan to boost its own finance industry by strengthening its single market for investment, and it will draft policy plans in the coming months aiming to boost its banks’ ability to compete globally. It is also creating a digital version of the euro currency, which would reduce its reliance on the dollar and on U.S. payment giants.

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.

Mario Draghi has a message to the EU’s leaders: I did my bit, now you do yours. Member countries had praised his proposals for fixing the bloc’s sagging economy when he delivered them. One year on, they’re still dragging their feet on actually following the advice — and Draghi is taking on the role of agitator. Europe has introduced few of the recommendations from his European Commission-backed plan to boost competitiveness, which includes continental-scale investments in infrastructure, a revamped energy grid providing affordable power to industry, coordinated military procurement to wean the bloc off of U.S. arms, and a unified financial sector that can pour capital into EU tech startups. Only last month, Draghi warned that governments must make “the massive investments needed in the future,” and “must do it not when circumstances have become unsustainable, but now, when we still have the power to shape our future.” DRAGGING IT OUT   It’s not the first time that the ex-European Central Bank chief has issued dire warnings on Europe’s dimming prospects. When he first presented his report in Brussels, Draghi spoke of the “slow agony” of decline. At the time, EU leaders across the political spectrum heaped praise on the MIT-trained economist’s reforming vision.  French President Emmanuel Macron said that Europe needed to “rush” to deliver the Draghi agenda. Spanish Prime Minister Pedro Sánchez threw his weight behind the reforms to avoid what he called the risk of falling behind in the most “cutting-edge technological sectors.” Even Germany’s Friedrich Merz, who disagrees with Draghi on the key issue of joint EU debt, parroted the economist when he said that Germany would “do whatever it takes” to shore up its defense sector — a reference to Draghi’s now-famous dictum on the eurozone crisis. But while leaders say they agree on the need for a more cohesive EU, behind the scenes the reform agenda is stalling. “The Draghi report has become the economic doctrine of the EU, and everything we’ve proposed since has been aligned with it,” Stéphane Séjourné, the Commission executive vice president charged with industrial strategy, told POLITICO. Still, he admitted that the “’Draghi effect’ too often fades when legislative texts are discussed by member states.”    A report by the European Policy Innovation Council think tank found that only 11 percent of the Draghi report had been acted on. In the field of energy, no actions have been completed at all. “It’s national interests, it’s national policies, sometimes it’s party political,” said MEP Anna Stürgkh, who recently authored a European Parliament study on the electricity grid. Speaking at an event about the Draghi report one year on, the Austrian Renew Europe lawmaker explained that it often came down to individual countries not wanting to share cheap energy with their neighbors.  In the field of energy, no actions have been completed at all. | Hannibal Hanschke/EPA “If they interconnect with countries that have higher energy prices, their prices will go up,” she said. “That is a fact.”  “It’s not the Commission which is not doing the banking union,” Spanish economist and former MEP Luis Garicano said at the same event, referencing the push to break down the thicket of national rules and vested interests that keeps the banking sector fragmented and country-specific. “It’s the governments that don’t actually want to allow the capital to flow from one country to the next.”  That same parochialism comes up again and again, from common debt — vetoed by so-called frugal countries like Germany and the Netherlands — to defense or to financial sector integration. It doesn’t help that countries are tightening their belts after the Covid-era spending splurge, leaving little money to pursue strategic aims. THE BULLY PULPIT    Draghi is a man used to wielding power directly, having injected hundreds of billions of euros into the eurozone economy during his tenure as ECB president. Earlier this decade he served over a year and a half as the prime minister of Italy.  In his latest incarnation as Europe’s Jiminy Cricket — the unheeded moral advisor — Draghi only has persuasion at his disposal. If on the one hand the frantic pace of events has drawn attention and bureaucratic resources away from the reform program, it’s also served as a powerful validation of his thesis. Draghi has long been a proponent of pooled sovereignty — which is to say that the EU’s member countries are more powerful when they act as a bloc, even if they lose some freedom at the national level. The problem is that it’s up to governments to decide to act. By February, Draghi was already chiding governments for putting the brakes on meaningful change during an appearance in front of the European Parliament. “You say no to public debt, you say no to the single market, you say no to create the capital market union. You can’t say no to everybody [and] everything,” he said. Now, as an intransigent U.S. embarrasses Europe on the world stage, Draghi has warned the window for change may be closing. The way that President Donald Trump got the better of EU negotiators, who were under pressure from capitals to come to a deal, was a case in point.  This was a “very brutal wake-up call,” Draghi warned at a meeting in the Italian seaside town of Rimini last month.  “We had to resign ourselves to tariffs imposed by our largest trading partner and long-standing ally, the United States,” he said. “We have been pushed by the same ally to increase military spending, a decision we might have had to make anyway — but in ways that probably do not reflect Europe’s interests.” The Secretariat-General, which reports to President Ursula von der Leyen, has set up a special unit to work on it. | Jessica Lee/EPA EYES ON BRUSSELS If Draghi is the brain that dreamed up the EU’s economic reform program, then the Commission’s bureaucrats are the hands charged with implementing it. The Secretariat-General, which reports to President Ursula von der Leyen, has set up a special unit to work on it. It’s headed by Heinz Jansen, a German official previously in the Economic Affairs Directorate, and eight staff in total. Critics argue this is a paltry number of staff to be attached to the task force, and that the EU executive could have set up a dedicated directorate. “The president attaches great importance to the implementation of the Competitiveness Compass,” a Commission spokesperson told POLITICO, referring to the EU executive’s plans to implement Draghi’s recommendations. According to officials who spoke with POLITICO, the task force mainly works on delivering wins on the ground, pooling funds and channeling them into a handful of core projects that might give Europe a shot at competing with the U.S. and China technologically. The Commission merged several programs into a new €410 billion fund to finance common industrial aims in its budget proposal, and is issuing a recommendation to governments to coordinate their investments this fall. But here, too, that will inevitably trigger tensions. “Can you really imagine a big EU country funding an industrial plant in Slovenia with its own taxpayers’ money?” asked one EU official. “There is a lack of ambition … the EU executive is taken hostage by some big countries.” “For years, the European Union believed that its economic size, with 450 million consumers, brought with it geopolitical power and influence in international trade relations,” Draghi said. “This year will be remembered as the year in which this illusion evaporated.” Jacopo Barigazzi and Nicholas Vinocur contributed reporting to the article.

BRUSSELS — After its defeat by the British in the First Opium War, the Qing dynasty signed a treaty in 1842 that condemned China to more than a hundred years of foreign oppression and colonial control of trade policy.   It was the first of what came to be known as “unequal treaties,” where the bullying military and technological heavyweight of the day imposed one-sided terms to try to slash back its massive trade deficit. Sound familiar? Fast-forward nearly two centuries, and the EU is starting to understand exactly how that feels. European Commission President Ursula von der Leyen’s dash to Donald Trump’s Turnberry golf resort in Scotland last month to seal a highly unbalanced trade deal has raised fears among politicians and analysts that Europe has lost the leverage that it once thought it had as a leading global trade power.  Von der Leyen’s critics were quick to assert that accepting Trump’s 15 percent tariff on most European goods amounted to an act of “submission,” a “clear-cut political defeat for the EU,” and an “ideological and moral capitulation.” If she had hoped that would keep Trump at bay, a rude awakening was in store. With the ink barely dry on the trade deal, Trump doubled down on Monday by threatening to impose new tariffs on the EU over its digital regulations that would hit America’s tech giants. If the EU didn’t fall into line, the U.S. would stop exporting vital microchip technologies, he warned. His diatribe came less than a week after Brussels believed it had won a written guarantee from Washington that its digital rulebook — and sovereignty — were safe.  Trump can wield this coercive advantage because — just like the 19th century British imperialists — he holds the military and technological cards, and is well aware his counterpart lags miles behind in both sectors. He knows Europe doesn’t want to face Russian President Vladimir Putin without U.S. military back-up and cannot cope without American chip technology, so he feels he can dictate the trade agenda. EU Trade Commissioner Maroš Šefčovič strongly implied last month that the deal with the U.S. was a reflection of Europe’s strategic weakness, and its need for U.S. support. “It’s not only about … trade: It’s about security, it is about Ukraine, it is about current geopolitical volatility,” he explained. The trade deal is a “direct function of Europe’s weakness on the security front, that it cannot provide for its own military security and that it failed to invest, for 20 years, in its own security,” said Thorsten Benner, director at the Global Public Policy Institute in Berlin, who also pointed to failures to invest in “technological strength” and to deepen the single market.  Just like the Qing leadership, Europe also scorned the warning signs over many years. “We are paying the price for the fact we ignored the wake-up call we got during the first Trump administration — and we went back to sleep. And I hope that this is not what we are doing now,” Sabine Weyand, director-general for trade at the European Commission, told a panel at the European Forum Alpbach on Monday. She was speaking before Trump’s latest broadside on tech rules.   After its defeat by the British in the First Opium War, the Qing dynasty signed a treaty in 1842 that condemned China to more than a hundred years of foreign oppression and colonial control of trade policy. | History/Universal Images Group via Getty Images It is clear that Trump’s volatile tariff game is far from over, and the 27-nation bloc is bound to face further political affronts and unequal negotiating outcomes this fall. To prevent the humiliation from becoming entrenched, the EU faces a huge task to reduce its dependence on the U.S. — in defense, technology and finance. STORMY WATERS  The Treaty of Nanking, signed under duress aboard the HMS Cornwallis, a British warship anchored in the Yangtze River, obliged the Chinese to cede the territory of Hong Kong to British colonizers, pay them an indemnity, and agree to a “fair and reasonable” tariff. British merchants were authorized to trade at five “treaty ports” — with whomever they wanted.  The Opium War began what China came to lament as its “century of humiliation.” The British forced the Chinese to open up to the devastating opium trade to help London claw back the yawning silver deficit with China. It’s an era that still haunts the country and drives its strategic policymaking both at home and internationally. A key factor forcing the Qing dynasty to submit was its failure to invest in military and technological progress. Famously, China’s Qianlong Emperor told the British in 1793 China did not require the “barbarian manufactures” of other nations. While gunpowder and firearms were Chinese inventions, a lack of experimentation and innovation slowed their development — meaning Qing weapons were about 200 years behind British arms in design, manufacture and technology.   Similarly, the EU is now being punished for falling decades behind the U.S. Slashing defense spending after the Cold War kept European countries dependent on the U.S. military for security; complacency about technological developments means the EU now is behind its global rivals in almost all critical technologies. U.S. Trade Representative Jamieson Greer has, for his part, declared the beginning of a new world order — which he dubbed the “Turnberry system” — comparing the U.S.-EU trade accord to the post-war financial system devised at the New England resort of Bretton Woods in 1944.    TURBULENCE AHEAD  With his attack on Monday, Trump demonstrated scant regard for the EU’s desire to bracket out sensitive issues from last week’s non-binding joint statement. The vagueness of the four-page text, meanwhile, leaves room for him to press new demands or threaten retaliation if he deems that the EU is failing to keep its side of the bargain.  More humiliation could follow as the two sides try to work out details — from a tariff quota system on steel and aluminium to exemptions for certain sectors — that still need to be ironed out.   “This deal is so vague that there are so many points where conflicts could easily be escalated to then be used as justification for why other things will not follow through,” said Niclas Poitiers, a research fellow at the Bruegel think tank.    Asked what would happen if the EU were to fail to invest a pledged $600 billion in the U.S., Trump said earlier this month: “Well, then they pay tariffs of 35 percent.”  With his attack on Monday, Trump demonstrated scant regard for the EU’s desire to bracket out sensitive issues from last week’s non-binding joint statement. | Chip Somodevilla/Getty Images It’s a danger the EU is acutely aware of.  The European Commission argues the $600 billion simply reflects broad intentions from the corporate sector that cannot be enforced by bureaucrats in Brussels. But Trump could well use the investment pledge as a trigger point to gun for higher duties.   “We do expect further turbulence,” said a senior EU official, granted anonymity to speak candidly. But “we feel we have a very clear insurance policy,” they added.     What’s more, by accepting the agreement, sold by the EU executive as the “less bad” option following Trump’s tariff threats, Brussels has also shown that blackmail works. Beijing will be watching developments with interest — just as EU-China ties have hit a new low and Beijing’s dominance on the minerals the West needs for its green, digital and defense ambitions hand it immense geopolitical leverage.  ESCAPING IRRELEVANCE But what, if anything, can the bloc do to avoid prolonging its period of geopolitical weakness?  In the lead-up to the deal, von der Leyen repeatedly emphasized that the EU’s strategy in dealing with the U.S. should be built on three elements: readying retaliatory measures; diversifying trade partners; and strengthening the bloc’s single market.     For some, the EU needs to see the deal as a wake-up call to usher in deep change and boost the bloc’s competitiveness through institutional reform, as outlined last year in landmark reports penned by former European Central Bank head Mario Draghi and former Italian Prime Minister Enrico Letta.    In response to the deal, Draghi issued a strongly-worded warning that Trump’s evident ability to force the bloc into doing his bidding is conclusive proof that it faces irrelevance, or worse, if it can’t get its act together. He also played up the failings on security. “Europe is ill-equipped in a world where geo-economics, security, and stability of supply sources, rather than efficiency, inspire international trade relations,” he said.   Eamon Drumm, a research analyst at the German Marshall Fund, also took up that theme. “Europe needs to think of its business environment as a geopolitical asset to be reinforced,” he said.  To do so, investments in European infrastructure, demand and companies are needed, Drumm argued: “This means bringing down energy prices, better putting European savings to use for investment in European companies and completing capital markets integration.”   In comments to POLITICO, French Europe Minister Benjamin Haddad also called for “investing massively in AI, quantum computing and green technologies, and protecting our sovereign industries, as the Americans do not hesitate to do.”   FREE TRADE For others, the answer lies in deepening and diversifying the bloc’s trade ties — Brussels insists the publication of its trade deal with the Mercosur bloc of South American countries is just around the corner, and it is eyeing deals with Indonesia, India and others this year. It has also signaled openness to intensifying trade with the Asia-focused CPTPP bloc, which counts Canada, Japan, Mexico, Australia and others as members.    “In addition to modernizing the [World Trade Organization], the EU must indeed focus on continuing to build its network of trade agreements with reliable partners,” said Bernd Lange, a German Social Democrat who heads the European Parliament’s trade committee.   “To stabilize the rules-based trading system, we should find a common position with democratically constituted countries,” added Lange.   Europe, said Drumm, faces a choice.  “Is it going to reinforce its position as a hub of free trade in a world where globalization is unwinding?” he asked. “Or is it just going to be a battlefield on which increasing competition between China and the United States plays out?” 

SOFIA — Bulgaria’s central bank governor expects the country to keep its political and fiscal discipline, even as its entry into the eurozone transforms its ability to borrow. “Fiscal discipline has been a cornerstone of our macroeconomic framework for more than a quarter of a century, and this should remain unchanged,” Governor Dimitar Radev said in exclusive comments to POLITICO. “The convergence process should reinforce — not weaken — our long-standing commitment to fiscal stability.” Previous expansions of the eurozone have often led to boom and bust cycles in the countries joining. This is because the ECB’s interest rates have tended to be too low for such economies, given that they have lower debt and higher growth potential than the big Western European economies. While the most spectacular example was Greece, most such busts have affected countries that, like Bulgaria, were emerging from communism with stunted financial systems and controls. But fears of a debt-fueled spending spree once Bulgaria secures low interest rates and easier access to international capital markets are misplaced, Radev said. “We are fully aware that joining the eurozone implies adopting a policy framework designed for the whole area,” Radev said. “The solution is to strengthen national policies, particularly in fiscal and structural domains, to ensure resilience under a common monetary regime.” The European Commission and the European Central Bank gave Bulgaria the final approval last week to adopt the euro on Jan. 1, 2026, making it the 21st member of the currency union. It’s a historic moment for the Balkan country of 6.4 million, which first committed to the step in 2007 but faced years of delays — most recently due to a bout of inflation after the pandemic and Russia’s invasion of Ukraine. In order to join the euro, Bulgaria’s average inflation rate from April 2024 to April 2025 had to fall within 1.5 percentage points of the rate of the three EU countries with the lowest inflation. It jumped to 4 percent at the start of the year as various measures to protect the population from the inflation surge — such as VAT holidays on restaurants, bread and flour — expired. However, it fell back to an annual average of 2.7 percent through April, with the help of a substantial drop in state-directed administrative prices. The numbers may now look alright but Brussels noted that Bulgaria still faces challenges in fighting corruption and improving judicial independence. Radev made clear that Bulgaria’s new status won’t radically alter its economic philosophy. “The key challenge is not whether we can borrow more, but whether we remain committed to using debt in a prudent and growth-oriented manner,” he said. NEW PRESSURES Bulgaria’s central bank, too, will face a significant adjustment. Under the currency board regime, inflation has been kept largely in check not through interest rate policy — which Sofia has ceded — but through fiscal discipline and tax policy. The Bulgarian National Bank’s main levers have instead been bank reserve requirements, currently set at 12 percent, and the interest rate charged on those reserves, which is set at zero. But it will lose control of both those levers from next year, with potentially big consequences: The ECB’s reserve requirement is only 1 percent. That means that, other things being equal, Bulgarian banks will suddenly have a lot more money available to lend, stoking a credit boom that is already in full swing: Mortgage lending was up 26 percent in the year to April, while consumer credit was up 14 percent. The Bulgarian National Bank’s main levers have instead been bank reserve requirements, currently set at 12 percent, and the interest rate charged on those reserves, which is set at zero. | Vassil Donev/EFE via EPA Joining the eurozone and shedding the currency board removes an automatic discipline mechanism and makes the Stability and Growth Pact rules — a framework that the EU has deliberately made more flexible — the ultimate constraint on fiscal policy. Those rules are all enshrined in national law too, but in its convergence report, the ECB noted that “further progress is still desirable” to ensure that Bulgaria’s fiscal council, which is responsible for monitoring the government’s observance of the rules, can provide adequate accountability. “It is a structural characteristic of the monetary union that monetary policy is common, while fiscal policies remain national,” Radev said, acknowledging the potential asymmetries. “We should not expect the ECB to tailor policy for individual economies — the responsibility lies with national authorities to align and adapt.” DIGITAL EURO AND MONETARY INNOVATION Bulgaria is joining the eurozone at a unique juncture: the potential introduction of a digital euro. Banking associations across the bloc are fretting that this will make their members more susceptible to deposit runs and crimp their ability to lend, if designed wrongly. That could be a particular problem for Bulgaria, where banks play an even larger role in financing the economy than in most parts of the eurozone, due to the lack of a domestic capital market. While Radev dismissed concerns that the digital euro would complicate Bulgaria’s entry, he acknowledged it adds “a layer of strategic thinking, particularly in the payments and technology domains.” He added that Bulgaria is participating actively in Eurosystem discussions about the digital euro’s design, advocating a model that preserves financial stability and protects privacy. “Any digital euro must respect European values, including the right to privacy,” he said, calling for a “calibrated approach” to avoid creating a surveillance tool. He argued that Bulgaria’s experience under the currency board — which has enforced conservative reserve management and strict liquidity practices among commercial banks — positions it well to manage the risks associated with a future digital euro. A CONSERVATIVE FORCE As Bulgaria prepares to take its seat at the table in Frankfurt, Radev signaled that the BNB will keep a cautious, stability-focused approach to monetary policy. While avoiding the traditional ‘hawk’ or ‘dove’ labels, Radev made clear he will side with policies that strengthen resilience, reduce fragmentation, and safeguard price stability in the euro area. “I lead one of the more conservative central banks, and we have no intention of revisiting that stance,” he said.

PARIS  —  The European Union’s former chief Brexit negotiator Michel Barnier is accusing his former boss Ursula von der Leyen of overseeing an “authoritarian drift” during her tenure leading the European Commission. In a new tell-all book out Wednesday chronicling his time in Brussels and brief stint as France’s prime minister, the 74-year-old said the drift “has increased a notch in the last six years with Ursula von der Leyen, who wants to decide everything.” Speaking to POLITICO before the book’s release, Barnier said that under von der Leyen, commissioners increasingly behaved like “super technocrats” rather than politicians. “There isn’t enough listening [in the Commission]. There isn’t enough listening to the people,” he said. Von der Leyen has long been accused of sidelining critics, promoting allies, governing through close aides and employing a Machiavellian divide-and-rule strategy during her years running the EU’s executive arm, which is made up of representatives from the bloc’s 27 member states. Barnier singled out excessive regulation and slow progress on integrating capital markets across the EU as major failures of the Commission during the von der Leyen years. The former French prime minister did, however, credit von der Leyen with successfully responding to the crises she faced, which have included the Covid pandemic and Russia’s invasion of Ukraine. Though Barnier and von der Leyen belong to the same political family, the conservative European People’s Party, they have bad blood that dates back to the last days of the Brexit negotiations. According to Barnier, von der Leyen sidelined him as talks with then-British Prime Minister Boris Johnson reached the endgame in 2020. “I thought it would be normal, after the work I’d done, to be by her side in the last hours. But it was not the case,” he said. A spokesperson for the European Commission declined to comment. FISHY BUSINESS Barnier’s book, “What I Have Learnt from You,” mostly chronicles his long political career in Brussels and Paris, though there are brief mentions of his short stint leading France’s government last year. Barnier lasted just three months in that job, the shortest prime-ministerial tenure in modern French history. With the release of his book, his name is increasingly being mentioned in the French press as a possible, albeit long-shot, contender for the presidency in 2027. In Brussels, Barnier is best known for his work leading the Brexit task force and his catchphrase aimed at the British: “The clock is ticking.” Michel Barnier lasted just three months in that job, the shortest prime-ministerial tenure in modern French history. | Pool Photo by Francisco Seco via EPA As the Brexit deadline neared, Barnier wrote, von der Leyen appeared ready to sacrifice European fishermen in her quest to secure a trade deal with the United Kingdom. He observed that fishing became “a secondary, possibly even marginal” topic for her. Barnier goes on to describe how he had to get French President Emmanuel Macron to threaten to veto the deal if von der Leyen failed to get an agreement on fishing. Von der Leyen, he writes, also ignored his departure from the Commission in 2021. “Decidedly, we do not have the same concept of work and human relationships,” he said. Barnier, however, praised the EU-U.K. reset agreement signed last month, which will make it easier for British food to be imported and extended the fishing agreement for EU trawlers. “It’s a good idea, it’s in the common interest. We’ll need to get the details but on fishing it is balanced and correct,” he said.