Filenews 15 November 2025
By Wesley Alexander Hill
In June 2025, as Beijing and Washington sat down at the table for the first round of trade talks in London, which ended only in a truce, Europe sought a diplomatic solution with China. The EU hoped that US scepticism towards green energy and China's increasing dependence on high-tech green energy exports would create space for cooperation between the EU and China. The logic was that Europe could absorb low-cost green energy technologies from China as a basis for Europe's reindustrialisation and to help achieve its own climate goals. At the same time, China would gain a larger market share in several wealthy, industrialized countries, in order to mitigate its losses in America. Progress ultimately failed due to disagreements over Ukraine, Russia, European protectionism and state investment. However, it put the world on alert: trade wars between China and the U.S. and, to a lesser extent, between Russia and the U.S. may have had unpredictable consequences.
Of particular importance to Europe was—and still is—the extent of the sanctions imposed on the West's adversaries. Sanctions have long been a favourite tool of US foreign policy. This mechanism, which often has little cost and great impact, has usually been powerful, drawing much of its power from the globalized economic system. Most of the sanctioned countries backed down and negotiated with Washington.
After being used to punish opponents, sanctions are increasingly becoming a mechanism to redirect global trade and accelerate or hinder protectionism. The problem with this strategy of using sanctions as de facto tariffs is that their effectiveness depends on a globalized economic order and puts significant pressure on U.S. allies. Their repeated use reduces their future usefulness while at the same time undermining the basis for many of Washington's alliances. So far, this has worked, allowing both the current and Biden administrations and the first Trump administration to bypass the Legislature and set their own economic policy. However, Washington... She is looking for nails to hit with her hammer, and these nails are not only Chinese. They are also European.
A new economic Cold War
The Trump administration has identified sanctions as an orthodox economic practice. The measures against Beijing aimed at curbing China's leadership in the energy sector are the perfect example, and China's rare earth policy demonstrates this in the most impressive way. Beijing's export licensing regime for October 2025, which requires state approval for all rare earths and processing technologies, is a strategic "strangulation" of the global economy. Talks between Trump and Xi Jinping in Seoul ended in an economic truce. A permanent solution is pending and further negotiations will be needed. However, the Trump administration's threatening response was revealing.
Instead of turning to other suppliers or promoting a different fiscal or industrial policy, the Trump administration has threatened 100% tariffs on Chinese imports and secondary sanctions on any company, American or otherwise, that works with Chinese entities.
Trump's approach to trade, tariffs and sanctions has always been transactional and has made US diplomacy and foreign policy less subservient to liberal ideological norms. The problem is not necessarily that these moves are not ideological, but rather that they are not strategic. Many of these transactions are so obsessed with reaching direct deals that the government can use them to "declare victory" that long-term structural advantages are defied in favour of a direct show of force. This approach is to China's advantage.
Winners and losers amid China-US confrontation
Europe is one of the big losers of the global US sanctions strategy and the rivalries between China – the US and Russia – the USA. Europe's economy is heavily dependent on niche industries that dominate established supply chains through high-quality and large investment funds. German medium-sized enterprises are the best-known example. The problem with this model, when it is over-propagated, as former Italian Prime Minister and head of the European Central Bank Mario Draghi noted in the EU's official report on Europe's competitiveness crisis, is that it inhibits European innovation and makes Europe extremely vulnerable to increasingly uncertain external market conditions.
This structural problem, combined with Washington's indifference, makes Europe more vulnerable. If Washington does not correct these mistakes, U.S. policies aimed at countering Chinese dominance in industry and energy may undermine European partners, pushing them toward Beijing or exposing them to disruptions in energy supplies.
When supply chain disruptions occur due to sanctions, America reaps a theoretical benefit: reindustrialization. In the U.S. domestic market, supply chain contractions may bring immediate "pain," but at least they have the theoretical long-term benefit of furthering the stated goal of the previous Biden administration and the current Trump administration. In Europe, with the Old Continent having limited capacity to engage in further resource extraction and already at (or close to) its maximum industrial potential, such disruptions have only negative effects.
The U.S. effort to secure rare earths may have benefited some U.S. companies, such as MP Materials or Australian mining giant Lynas, but it has devastated Europe. Europe depends on China for 97% of rare earth processing, the critical link in the production of advanced electronic systems, magnets and renewable technologies. The restrictions have already disrupted production lines in Germany and France. Large companies such as Volkswagen, Siemens and Airbus are facing an increase in the cost of primary products by up to 20%.
This is also evident in the liquefied natural gas (LNG) sector. When cuts to Russian gas from Europe began after February 2022, American politicians used the sanctions not only to express their disapproval of Moscow, but also to promote American LNG as an alternative. This was understandable, as in the short term Europe needed an alternative supplier.
The recent US policy towards international LNG companies only confuses and harms Europe. It makes no sense for the US to lift sanctions against Rosneft Germany, while at the same time imposing sanctions on alternative non-Russian sources of hydrocarbons that Europe has long been "cultivating" in the production of natural gas in Turkmenistan and Azerbaijan, with the logic that these sanctions are against Russia and China, even though Russian companies such as Lukoil and Rosneft, or the Chinese CNPC, have minority packages in these sources. The difference is the presence of American energy companies.
What Washington is doing is imposing sanctions on Europe, which is looking for non-Russian energy sources and any non-American energy supplier. Even more ironic is the fact that, when Lukoil's projects were not subject to sanctions, even though they were the subject of controversy, it was more difficult for the company to transfer funds or assets to Russia. Now that these sanctions have been imposed, Lukoil has less incentive to comply with international regulatory bodies and is proceeding with asset sales, with the proceeds likely ending up in the Russian war machine.
Sanctions against Lukoil would be effective if they were applied consistently in the context of a broader geopolitical strategy or taking into account America's European partners. Lukoil and its European subsidiaries are under sanctions, while some of its projects with American partners are exempt. Washington would serve its interests better if it went one way or the other, rather than a compromise that satisfies no one and alienates allies.
Between solidarity and survival
The "schizophrenic" policy of the US regarding energy sanctions, the inability to decide whether to relax or increase the pressure on Russia or China, while de facto imposing sanctions on Europe, will make it easier for Brussels to listen to the voices that question the usefulness of the Western alliance.
In any case, the intransigent pursuit of economic dominance over China and, to a lesser extent, over Russia undermines its long-term cooperation with Europe. The pursuit of American economic interests is understandable, but in its current form it is self-destructive. Few dispute that sanctions against China on security and human rights issues have moral and political utility. However, ethics does not pay electricity bills or secure raw materials.
The challenge for Washington is that it must not take Europe for granted and recognize that even allies with shared democratic traditions need material incentives to stay on its side. U.S. foreign policy needs to pay more attention to Europe's energy and industrial challenges. For its part, Brussels must accept justified American actions against China and understand market disturbances as a reality of competition between great powers. If Washington cannot make these minimal concessions, U.S. power will continue to erode in favour of China.
