The Finder | Our monthly Insights | Issue 20 – August, 2025

Among trade, economic and geopolitical tensions, the current EU legislative term enters a critical stage

Marked by the umpteenth climate change warning, renewed geopolitical turbulence and economic and energy pressures, August has been an eventful month for the European Union. Europe’s resilience and its global role have been the main underlying themes. Against this backdrop, the current legislative term is entering a critical stage, with the recent and upcoming initiatives of EU institutions as a whole coming under review.

While severe wildfires were erupting in Spain and Portugal, the US administration was in the midst of organising the so-called “Alaska Summit” held on the 15th of August and followed shortly after by the “Washington Summit“. The latter international meeting saw the participation from several EU countries, whose priorities focused on securing guarantees for any potential peace agreement, aiming to shield Ukraine from future Russian attacks. The summit did not result in a peace agreement, but Europe’s role re-emerged in the process, albeit amid some criticism regarding its capacity to act as an autonomous player.

Internally, the European debate was reignited on Friday, the 22nd of August, when Mario Draghi stated: “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. This year will be remembered as the year in which this illusion evaporated.“

Shortly thereafter, on Sunday, the 24th of August, European Commission President Ursula von der Leyen intervened with an article in several European newspapers defending the EU-US trade agreement. She argued that a transatlantic confrontation on trade would have harmed EU interests, whilst benefiting Russia and China. President von der Leyen described the agreement as optimal, emphasising that tariffs are “taxes that burden consumers and businesses“, increasing costs, reducing choice and undermining economic competitiveness.

The juxtaposition between Mario Draghi and Ursula von der Leyen is also a consequence of their different institutional roles and has been anticipated by a EU-US joint statement on their trade deal, which set, in sum, a 15% tariff ceiling on most EU exports. The statement also noted that the negotiated outcome “avoids harmful escalation“, whilst laying the groundwork for continued dialogue and further development of the transatlantic relationship, including in areas of shared strategic interest.

More recently, President Trump has threatened additional tariffs and export restrictions on countries the US administration deems unfairly targeting US tech firms. While the US President did not name any specific country, his comments could be interpreted as a critique of the EU’s Digital Markets Act and Digital Services Act, reinforcing the view that transatlantic trade tensions are unlikely to ease in the near term.

The EU-US trade deal has been seen by some observers as a sign of strength of the new US positioning on the global stage. However, other observers have argued that imposing extensive tariffs on important allies and confronting the Federal Reserve may target the foundation of America’s economic power, a process which would have an impact on the EU as well.

Within this context, EU institutions are resuming their activities and entering a crucial phase of the current legislative term. While the Clean Industrial Deal has already been launched, upcoming initiatives such as the reform of the Single Market, an omnibus package for regulatory simplification, in addition to the measures to address the question of energy prices, enhance the EU’s competitive edge and foster sustainability, will be pivotal. These initiatives aim to partially offset the negative effects of both the very recent EU-US trade agreement and the EU’s relatively recent loss of economic competitiveness.

Last year, Mario Draghi’s landmark report seemed to signal a turning point and the analysis was striking: the era of open, rules-based trade was coming to an end. As a result, Europe needed a bold new industrial and external relations strategy. The prescription was also clear: trim regulations, foster closer coordination among member states, tear down internal market barriers, launch joint investment projects and knit capital markets more tightly together. Yet, twelve months on, much of this vision remains uncertain, with some initiatives taking shape while others still linger as ambitious goals.

An ECFR Policy Alert warns that, although the 15th of August summit in Alaska between Trump and Putin produced no deal, the emerging trajectory should alarm Europeans. It highlights how Ukraine and its European allies were excluded from the talks, exposing a marginalisation of European influence in decisions affecting its future. The Alert argues that this dynamic highlights the urgent need for Europe to build strong European military forces, treat Ukraine as a military partner, and condition its support across the eastern neighbourhood countries.

A Clingendael op-ed examined the tooth-to-tail ratio as a measure of European NATO forces’ efficiency. It followed NATO nations’ decision at The Hague to spend at least 3.5% of GDP on core defence annually. The author acknowledged the ratio’s usefulness for assessing combat capability versus budget efficiency. However, he challenged the arguments for increasing the ratio, citing technological advances to improve decision-making. He suggested including unmanned systems and evaluating support structures to better gauge efficiency. Ultimately, European militaries need both stronger combat forces and a leaner, more effective support system.

A CER Insight commented on the nature and the implications of the EU-US trade agreement signed at the end of July 2025. A 15% tariff will apply to EU products, including autos, pharmaceuticals, and semiconductors, with steel, aluminium and copper rates still uncertain. The author highlighted legal challenges and the difficulty of enforcing WTO rules to address them. EU concessions include vague commitments on tariffs, investment, seafood, agriculture, energy and military purchases. Brussels secured preferential terms compared to other US trade partners like Korea, Australia, and Israel. The deal’s details may yet falter, requiring ongoing EU-US adjustments and posing a risk of conflict.

In the ETNC 2025 report, Ifri’s Contribution examines France’s pursuit of a more autonomous and sovereign Europe. The authors emphasise that strategic autonomy should empower Europe to act independently whilst remaining anchored to transatlantic ties. With Trump, Washington appears to be distancing itself from Europe’s key interests. While France deliberately refrains from closer alignment with Beijing, it focuses instead on strengthening the EU and cultivating partnerships with regional powers such as Japan and India.

In July 2025, the European Commission unveiled its proposal for the EU’s next long-term budget (2028–2034), introducing the €200.3 billion Global Europe instrument. ECDPM published a Companion Guide analysing the proposal’s core features, highlighting concerns about predictability, oversight, and the politicisation of humanitarian aid.

An SWP Commentary argues that Europe needs clearly defined security priorities to make increased defence spending effective. It highlights the importance of long-term military support for Ukraine, creating an EU internal market for armaments, and expanding joint financing through the European Defence Fund and other instruments. The authors stress the need for stronger European coordination and new community structures to align strategic and military objectives. They conclude that Europeanising defence and armaments policy will require reducing national leeway, but will strengthen Europe’s ability to defend itself quickly, enhance sovereignty, and improve its attractiveness to partners, including the US.

A Finabel publication highlights that increasingly sophisticated cyberattacks have reshaped conflict dynamics and exposed gaps in the international law on self-defence. NATO faces digital threats capable of major disruption without physical violence, testing the relevance of Article 5. Although NATO declarations acknowledge that severe cyberattacks could trigger mutual defence, uncertainty over attribution and non-state actor involvement complicates responses. The author cautions that NATO’s reliance on cyberspace means a unilateral invocation of Article 5 could generate legal and operational ambiguities.

In a Project Syndicate Commentary, the author warns that Trump’s policies are weakening the US dollar’s reserve-currency status. By increasing federal debt, undermining the Federal Reserve’s independence, and imposing tariffs on allies, Trump is weakening America’s financial power. A loss of this status would not be gradual or orderly and could trigger a disruptive realignment of global financial markets.

A CEPS Commentary provides the picture of Europe as a continent privileging disclosure frameworks over structural reforms which would abate emissions or enhance competitiveness, with the EU-US tariff agreement and the fall-back from key Green Deal measures as symptoms of incoherence in Europe’s economic and climate strategy. The author argues that, while the US considers industrial backsliding and China increases clean-tech dominance, the EU should align its trade, competition and investment policies with the green transition’s structural demands, which means supporting emerging industries, prioritising energy independence, and designing markets for outcomes. In this connection, the author called for the EU’s shift from performative transparency to structural accountability.

This editorial is authored by Massimiliano Gobbato, Communications Director. Contributions by PubAffairs Communications Team’s Nicole Finucci, Kristina Vilenica and Jacopo Bosica to the drafting of ‘The Finder’ are gratefully acknowledged. 

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